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  • Delimitation Commission for NE states and UTs

    Lok Sabha speaker has nominated 15 MPs to assist the Delimitation Commission in redrawing the Lok Sabha and the Assembly constituencies of the northeastern states and the Union Territories.

    Practice question for mains:

    Q. What is the Delimitation of Constituencies? Discuss its significance.

    What is Delimitation? Why is it needed?

    • Delimitation is the act of redrawing boundaries of Lok Sabha and state Assembly seats to represent changes in population.
    • In this process, the number of seats allocated to different states in Lok Sabha and the total number seats in a Legislative Assembly may also change.
    • The main objective of delimitation is to provide equal representation to equal segments of a population.
    • It also aims at a fair division of geographical areas so that one political party doesn’t have an advantage over others in an election.

    Legal status

    • Delimitation is carried out by an independent Delimitation Commission (DC).
    • The Constitution mandates that its orders are final and cannot be questioned before any court as it would hold up an election indefinitely.

    How is delimitation carried out?

    • Under Article 82, the Parliament enacts a Delimitation Act after every Census.
    • Once the Act is in force, the Union government sets up a DC made up of a retired Supreme Court judge, the Chief Election Commissioner and the respective State Election Commissioners.
    • The Commission is supposed to determine the number and boundaries of constituencies in a way that the population of all seats, so far as practicable, is the same.
    • The Commission is also tasked with identifying seats reserved for Scheduled Castes and Scheduled Tribes; these are where their population is relatively large.
    • All this is done on the basis of the latest Census and, in case of difference of opinion among members of the Commission, the opinion of the majority prevails.

    Implementation

    • The draft proposals of the DC are published in the Gazette of India, official gazettes of the states concerned and at least two vernacular papers for public feedback.
    • The Commission also holds public sittings.
    • After hearing the public, it considers objections and suggestions, received in writing or orally during public sittings, and carries out changes, if any, in the draft proposal.
    • The final order is published in the Gazette of India and the State Gazette and comes into force on a date specified by the President.

    How often has delimitation been done in the past?

    • The first delimitation exercise in 1950-51 was carried out by the President (with the help of the Election Commission).
    • The Constitution at that time was silent on who should undertake the division of states into Lok Sabha seats.
    • This delimitation was temporary as the Constitution mandated redrawing of boundaries after every Census. Hence, delimitation was due after the 1951 Census.

    Why more independence to DC?

    • Pointing out that the first delimitation had left many political parties and individuals unhappy, the EC advised the government that all future exercises should be carried out by an independent commission.
    • This suggestion was accepted and the DC Act was enacted in 1952.
    • DCs’ has been set up four times — 1952, 1963, 1973 and 2002 under the Acts of 1952, 1962, 1972 and 2002.
    • There was no delimitation after the 1981 and 1991 Censuses.

    Why postponed till 2026?

    • Although the freeze on the number of seats in Lok Sabha and Assemblies should have been lifted after the 2001 Census, another amendment postponed this until 2026.
    • This was justified on the ground that a uniform population growth rate would be achieved throughout the country by 2026.
    • So, the last delimitation exercise — started in July 2002 and completed on May 31, 2008 — was based on the 2001 Census and only readjusted boundaries of existing Lok Sabha and Assembly seats and reworked the number of reserved seats.

    Back2Basics: History of Delimitation in J&K

    • Delimitation of J&K’s Lok Sabha seats is governed by the Indian Constitution, but the delimitation of its Assembly seats (until special status was abrogated recently) was governed separately by its Constitution and J&K Representation of the People Act, 1957.
    • As far as the delimitation of Lok Sabha seats is concerned, the last DC of 2002 was not entrusted with this task. Hence, J&K parliamentary seats remain as delimited on the basis of the 1971 Census.
    • As for Assembly seats, although the delimitation provisions of the J&K Constitution and the J&K RP Act, 1957, are similar to those of the Indian Constitution and Delimitation Acts.
    • They mandate a separate DC for J&K. In actual practice, the same central DC set up for other states was adopted by J&K in 1963 and 1973.
    • While the amendment of 1976 to the Indian Constitution suspended delimitation in the rest of the country till 2001, no corresponding amendment was made to the J&K Constitution.
    • Hence, unlike the rest of the country, the Assembly seats of J&K were delimited based on the 1981 Census, which formed the basis of the state elections in 1996.
    • There was no census in the state in 1991 and no DC was set up by the state government after the 2001 Census as the J&K Assembly passed a law putting a freeze on fresh delimitation until 2026.

  • ‘Rozgar Setu’ Scheme for skilled workers

    The Madhya Pradesh has announced the launch of the ‘Rozgar Setu’ Scheme to help secure employment for skilled workers who have returned.

    State schemes are quite often seen in the news. They are very important from the prelims perspective:

    Rytha Bandu (Telangana): Cash transfer scheme of Rs 5,000/acre, per season

    KALIA (Krushak Assistance for Livelihood and Income Augmentation) Scheme (Odisha)

    Mukhya Mantri Krishi Aashirwad Yojana (Jharkhand)

    Krishak Bandhu Scheme (West Bengal)

    ‘Rozgar Setu’ Scheme

    • The ‘Rozgar Setu’ scheme to provide work to the maximum number of returned skilled workers.
    • After such workers requiring employment are identified, the government will contact factory and workshop owners and contractors overseeing infrastructure projects such as road and bridge construction.
    • This would fulfil the manpower requirement of industries as well as provide employment to workers during the COVID-19 pandemic.

  • Expansion of the Amery Ice Shelf

     

    There would be a 24% increase in the expansion of the Amery Ice Shelf (AIS) boundaries in Antarctica by 2021 and another 24 per cent by 2026 from its 2016 positions, the National Centre for Polar and Ocean Research (NCPOR) in Goa has predicted.

    Practice question for mains:

    Q. Discuss the interrelation between Cryosphere and Climate change in context to the melting ice shelves in the Antarctic region.

    Amery Ice Shelf (AIS)

    • The Amery Ice Shelf is a broad ice shelf in Antarctica at the head of Prydz Bay between the Lars Christensen Coast and Ingrid Christensen Coast.
    • It is part of Mac. Robertson Land.
    • The name “Cape Amery” was applied to a coastal angle mapped on February 11, 1931.
    • The AIS is one of the largest glacier drainage basins in the world, located on the east coast of Antarctica, at about 70ºS Latitude, 70ºE Longitude.
    • The AIS dynamics and mass balance help in understanding the changes in the global climate scenario.

    Significance of the study

    • NCPOR observations revealed a critical cooling of the sea surface temperature, resulting in an advancement of the ice shelf by 88 per cent in the past 15 years.
    • These changes would contribute in a major way to climate variability.
    • The study clearly demonstrated the future dynamism of ocean heat fluctuation and Antarctic Amery ice shelf mass shifting-extent.

    Back2Basics: Ice Shelves

    • The floating sheets of ice called ‘ice shelves’ play a multi-faceted role in maintaining the stability of a glacier. Ice shelves connect a glacier to the landmass.
    • The ice sheet mass balance, sea stratification, and bottom water formation are important parameters for the balancing of a glacier. Latent and sensible heat processes do play important roles here.
    • The insulation of ice shelves from atmospheric forcing is dependent on a temperature gradient that the ocean cavity beneath the ice shelves provides.
    • It is the pressure exerted by the ice shelves upon the ocean cavity that determines this temperature gradient.

  • Missile Park ‘AGNEEPRASTHA’

    Foundation Stone for a Missile Park “AGNEEPRASTHA” was recently laid at INS Kalinga, Vizag.

    Caution: Agneeprastha is a missile park of the eastern naval command of the Indian Navy. It has nothing to do with the Agni missiles.

    Missile Park ‘Agneeprastha’

    • ‘Agneeprastha’ aims to capture glimpses of Missile History of INS Kalinga since 1981 till date.
    • The Missile Park has been set up with a replica of missiles and Ground Support Equipment (GSE) that showcase the evolution of missiles handled by the unit.
    • The exhibits have been created from scrap / obsolete inventory which have been reconditioned in-house.
    • The main attraction is P-70 ‘Ametist’, an underwater launched anti-ship missile from the arsenal of the old ‘Chakra’ (Charlie-1 submarine) which was in service with IN during 1988-91.
    • It will also provide a one-stop arena for motivation and stimulation of inquisitive minds regarding the missiles and related technologies, from school children to naval personnel and their families.

  • Foreign direct investment (FDI) in India

    The FDI in India grew by 13% to a record of $49.97 billion in the 2019-20 financial years, according to official data.

    Get aware with the recently updated FDI norms. Key facts mentioned in this newscard can make a direct statement based MCQ in the prelims.

    Ex. FDI source in decreasing order: Singapore – Mauritius – Netherland – Ceyman Islands – Japan – France

    Data on FDI

    • The country had received an FDI of $44.36 billion during April-March 2018-19.
    • The sectors which attracted maximum foreign inflows during 2019-20 include services ($7.85 billion), computer software and hardware ($7.67 billion), telecommunications ($4.44 billion), trading ($4.57 billion), automobile ($2.82 billion), construction ($2 billion), and chemicals ($1 billion).
    • Singapore emerged as the largest source of FDI in India during the last fiscal with $14.67 billion investments.
    • It was followed by Mauritius ($8.24 billion), the Netherlands ($6.5 billion), the U.S. ($4.22 billion), Caymen Islands ($3.7 billion), Japan ($3.22 billion), and France ($1.89 billion).

    What is FDI?

    • An FDI is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.
    • It is thus distinguished from a foreign portfolio investment by a notion of direct control.
    • FDI may be made either “inorganically” by buying a company in the target country or “organically” by expanding the operations of an existing business in that country.
    • Broadly, FDI includes “mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans”.
    • In a narrow sense, it refers just to building a new facility, and lasting management interest.

    FDI in India

    • Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then FM Manmohan Singh.
    • There are two routes by which India gets FDI.

    1) Automatic route: By this route, FDI is allowed without prior approval by Government or RBI.

    2) Government route: Prior approval by the government is needed via this route. The application needs to be made through Foreign Investment Facilitation Portal, which will facilitate the single-window clearance of FDI application under Approval Route.

    • India imposes a cap on equity holding by foreign investors in various sectors, current FDI in aviation and insurance sectors is limited to a maximum of 49%.
    • In 2015 India overtook China and the US as the top destination for the Foreign Direct Investment.

    Back2Basics

    Amendment in the FDI Policy for curbing opportunistic takeovers/acquisitions of Indian companies

  • India-Pak cooperation against Locusts Attack

    As another locust swarm comes from Pakistan, the spotlight is again on the India-Pakistan dynamic that has come into play.

    Do you know?

    The Food and Agricultural Organization (FAO) believes locusts have decimated close to 70,000 hectares of crops in Kenya, 30,000 hectares in Ethiopia and 42,000 hectares of crops in the state of Rajasthan.
    Just so you can perhaps assess the kind of damage we are talking about here. A large swarm can eat as much as about 35,000 people in one day 😀 !

    What are Locusts?

    • The desert locust (Schistocerca gregaria) is a short-horned grasshopper that is innocuous while it is in a “solitary phase” and moving about independently.
    • These winged insects differ from normal hoppers and become dangerous only when their populations build up rapidly and the close physical contact in crowded conditions triggers behavioural changes.
    • They, then, enter the “gregarious phase”, by grouping into bands and forming swarms that can travel great distances (up to 150 km daily), while eating up every bit of vegetation on the way.
    • If not controlled at the right time, these insect swarms can threaten the food security of countries.

    India reaches out to Pak

    • The Ministry of External Affairs said that it has reached out to Pakistan for cooperation, and is awaiting their response.
    • Despite the ups and downs in the bilateral relationship, cooperation on the locust warning system has survived the wars, terrorist attacks, and political turmoil.

    History of outbreaks in India

    • Records suggest that since the beginning of the 19th century, there have been at least eight “outbreaks” in India from 1812 to 1889, and a ninth in 1896-1897.
    • According to the history of the Locust Warning Office published by the UN Food and Agriculture Organization (FAO), there were “serious invasions” of locusts in India every few years during the 1900s.
    • A “five-year invasion” from 1926 to 1931 is estimated to have damaged crops worth Rs 2 crore (about $100 million at today’s prices).
    • The princely states and provinces had their own structures to deal with this, but there was no coordination.

    The Locust Warning Organization (LWO)

    • After the 1926-32 “invasion”, the British Indian government-sponsored a research scheme, starting in 1931, which led to the permanent Locust Warning Organization (LWO) in 1939.
    • It had its headquarters in New Delhi and a substation in Karachi.
    • In 1941, a conference of princely states in desert areas and provinces affected by locusts was held.
    • Its role was expanded in 1942, and in 1946 a bureaucratic structure was put in place.

    Beginning of cooperation

    • Iran too suffered locust attacks, in 1876, and in 1926-1932.
    • Apparently the first case of collaboration between countries in the region occurred in 1942 when a delegation from India helped with locust control work in southwest Persia.
    • Over the next two years, Indian help was also provided to Oman and Persia.
    • This was followed by the first conference within the region on Desert Locust, which was held in Tehran in 1945 and involved Iran, India, Saudi Arabia and Egypt.
    • A second conference took place in 1950 also in Tehran with Pakistan participating.

    Bringing in Pakistan

    • In the 1950s, India and Iran cooperated and Pakistan provided two aircraft for locust surveys in Saudi Arabia.
    • Following another attack during 1958-61, a decision was taken to group Iran, Afghanistan, Pakistan and India together and the FAO Desert Locust commission was formed in 1964.
    • The commission held annual sessions skipped in 1965 and 1999 but held in 1971.
    • Even in the last six years when the relationship between India and Pakistan has deteriorated, it has been held in 2014, 2016 and 2018.
    • The meetings are attended by locust control experts, with no diplomats.

    India and Pakistan

    • In 1977, the two countries began to meet on the border.
    • From 1991 to 2003, special border surveys took place during the summer, undertaken by locust control officers in their respective countries.
    • Joint border meetings have taken place every year since 2005 till 2019, except in 2011. This has been despite every diplomatic strain; including the 26/11 Mumbai attacks.
    • Arrangements are made in advance and protocols are followed for crossing the border.
    • While politics and diplomacy is kept out of the technical discussions, locust control authorities feel that one of the more difficult challenges faced by the commission is that of “insecurity and sensitivities” in the region.

    Also read:

    Risk of Early Locusts Attacks: A new concern

    Try this:

    Q. Time and again normal ocean cycles got more pronounced or disrupted, resulting in all kinds of unintended consequences, like an ever-increasing domino effect of locust attacks in Asia and the Indian Sub Continent. We need to understand these links if we are to plan effectively for climate change mitigation and adaptation. Discuss. (250W)

  • [pib] Instant PAN through Aadhaar based e-KYC

    The Union Finance Ministry has launched the facility for instant allotment of (Permanent Account Number) PAN.

    Try this question from CSP 2018:

    Q.) Consider the following gatemen.

    1. Aadhaar card can be used as a proof of citizenship or domicile.

    2. Once issued, the Aadhaar number cannot be deactivated or omitted by the Issuing Authority.

    Which of the statements given above is/are correct?

    (a) 1 only

    (b) 2 only

    (c) Both 1 and 2

    (d) Neither 1 nor 2

    Can’t you expect a similar question based on PAN card? If not , go through this newscard.

    What is a Permanent Account Number?

    • A PAN is a ten-character alphanumeric identifier, issued in the form of a laminated “PAN card”, by the Income Tax Department.
    • It is issued to any “person” who applies for it or to whom the department allots the number without an application.
    • A PAN is a unique identifier issued to all judicial entities identifiable under the Indian Income Tax Act, 1961.
    • The income tax PAN and its linked card are issued under Section 139A of the Income Tax Act.
    • It is issued by the Indian Department under the supervision of the Central Board for Direct Taxes (CBDT) and it also serves as an important proof of identification.
    • It is also issued to foreign nationals (such as investors) subject to a valid visa, and hence a PAN card is not acceptable as proof of Indian citizenship.

    Uses of PAN

    • The primary purpose of the PAN is to bring a universal identification to all financial transactions and to prevent tax evasion by keeping track of monetary transactions.
    • The PAN is mandatory when filing income tax returns, tax deduction at source, or any other communication with the IT Department.
    • PAN is also steadily becoming a mandatory document for opening a new bank account, a new landline telephone connection / a mobile phone connection, purchase of foreign currency, bank deposits above ₹50,000, purchase and sale of immovable properties, vehicles etc.

    Why it is in the news?

    • A PAN is necessary for filing income tax returns.
    • This facility is now available for those PAN applicants who possess a valid Aadhaar number and have a mobile number registered with Aadhaar.
    • The allotment process is paperless and an electronic PAN (e-PAN) is issued to the applicants free of cost.

  • How effective is the stimulus package to revive the supply chains?

    Disruption of the supply chains lies at the heart of the decline in the output amid lockdown. And the government has announced the fiscal stimulus to revive the economy. How effective will be the fiscal stimulus to streamline the supply chains? The focus of this article is on tackling this question.

    Disruption in supply chains and decline in output

    • Much of the decline in output is due to supply chain disruptions generated by the lockdown.
    • Government spending can do little to alleviate this.
    • Putting money in the hands of people can increase the demand for goods but cannot increase the supply of goods and services.
    • In modern economies, the production of goods happens through complex supply chains that traverse geographical boundaries.

    Let’s understand how supply chains work

    •  Upstream sectors like ‘mining’ produce metals that are in turn used to produce machines.
    • These machines are used to sow seeds, harvest crops, and transport fuel.
    • Finally, the harvested crops are used by downstream sectors to produce flour and bread.
    • At each step, machines and labour combine to produce goods which are the inputs for sectors further downstream.

    So, how lockdown affected the supply chains?

    • Under the lockdown, numerous inputs have not moved from their producers to their users.
    • These disruptions may not at first generate a reduction in consumer goods like bread.
    • However, the availability of consumer goods will begin to decline as bakers run out of flour, and mills exhaust their stocks of wheat.
    • And there is no way to guarantee the flow of essential goods while suspending the production of non-essential goods.
    • Automotive spare parts may be non-essential in the short run, but become essential as food-carrying trucks begin to break down.(i.e. in the long run)
    • How far is the long run? This is difficult to say; there may be some variation across goods.

    Impact of labour shortage on supply chains

    • The supply chain disruptions are going to be amplified by labour shortage as workers remain at home.
    • Countries like India are likely to experience a greater reduction in output on this count than, say, Europe or the U.S.
    • This is because of the higher labour intensity of production in India.
    • To understand this, think of the difference in unloading of goods in the port at Rotterdam and the port at Kochi.
    • Is it viable to substitute labour with capital? Poorer countries are less likely to be able to substitute locked down labour with capital because of the dearth of capital in these nations.

    Adapting and Adjusting to the new reality

    • As economies emerge out of the lockdown, entrepreneurs, workers, and consumers must adjust to the new reality.
    • The world supply chain must adapt.
    • Firms may choose to source inputs from suppliers in their geographical proximity to minimise the risk of future disruptions.
    • But this involves building productive capacity at new locations, all of which requires investments fuelled by savings.
    • Furthermore, the investments must be guided by price signals.
    • Within a market economy, the movement of prices provides the incentive and information needed to adapt and grow.
    • As economist Ronald Coase put it, prices are bundles of information wrapped in an incentive.
    • As the prices of some inputs rise, the buyers of these inputs look for alternate suppliers, and firms which did not hitherto produce the good have an incentive to do so.
    • The key to economic recovery lies in millions of such adjustments.
    • Through such adjustments, firms locate new providers of inputs, new buyers of their output, and build factories at new locations.

    How fiscal stimulus would disrupt the recovery of supply chains?

    • Market adjustment processes are likely to be disrupted by government stimulus packages.
    • Governments spend by printing money, raising debt, or increasing taxes.
    • Irrespective of the way in which the expenditure in funded, resources are transferred from private entrepreneurs to government bureaucrats.
    • When governments print money, they draw resources through inflation.
    • Bureaucrats tend to be less efficient than profit-motivated firms in allocating scarce resources.
    • Bureaucrats have little incentive or information to bring about the granular supply chain adjustments necessary to revive growth.
    • As the stimulus package kicks in, economic efficiency is likely to decline and so are the chances of a timely recovery of output.

    A lesson from West Germany after WW II

    • The experience of West Germany after World War II has a useful lesson for India.
    • Beginning mid-1944, Allied bombing disrupted the German supply chain by targeting bottleneck sectors like electric power generation.
    • This destruction of the supply chain devastated the German economy.
    • Per person food production fell to about half of its pre-war level.
    • Two years later, this changed after Chancellor Ludwig Erhard lifted price controls and cut taxes.
    • West German entrepreneurs re-established a thriving supply chain through which goods went from upstream sectors to final consumers.
    • By 1950, per capita income in West Germany had reached its pre-war level.

    Consider the question “Supply chain disruption has been at the core of economic consequences of the corona pandemic. New adjustment in the supply chains would be the norm in the aftermath of the pandemic. What these readjustments would entail? Suggest the measures to help the supply chains recover.”

    Conclusion

    The recent supply chain disruptions are likely to last long. The path to recovery lies in cutting government expenditure, removing price controls, and opening up trade.

  • What is the Korean Armistice Agreement?

    A United Nations investigation into a recent exchange of gunfire between North Korea and South Korea inside the Demilitarized Zone (DMZ) has determined that both countries violated the armistice that ended the 1950-53 Korean War.

    Practice question for mains:

    Q. What is the Korean Armstice Agreement? Discuss the concept of the Demilitarized Zone (DMZ)?

    The Korean Armstice Agreement

    • The Korean Armstice Agreement signed on 27 July 1953 is the armistice that brought about a complete cessation of hostilities of the Korean War.
    • It was not the end of a war, but only a cessation of hostilities in an attempt to negotiate a lasting peace.
    • Military commanders from China and North Korea signed the agreement on one side, with the US-led United Nations Command signing on behalf of the international community.

    What is the Demilitarized Zone (DMZ)?

    • The DMZ marks where the 1950-53 Korean War — when China and North Korea battled UN forces led by the United States — ended with an armistice, not a treaty.
    • It is a 2 km-wide buffer, stretching coast to coast across the peninsula, lined by both sides with razor wire, heavy armaments and tank traps.
    • It is 60 km from Seoul and 210 km from the North Korean capital of Pyongyang. Inside the DMZ is a Joint Security Area (JSA).
    • The so-called ‘peace village’ of Panmunjom, where the armistice that halted the Korean War was signed in 1953, is located in the 800-metre-wide and 400-metre-long JSA zone.
    • A Military Demarcation Line (MDL) marks the boundary between the two Koreas.

    Why it is significant?

    • Vast stretches of the DMZ have been no man’s land for more than 60 years, where wildlife has flourished undisturbed.
    • Last year, US President Donald Trump met with North Korean leader Kim Jong Un at the demilitarized zone separating the two Koreas, in Panmunjom.

  • What is the doctrine of Force Majeure?

    The recent spread of the Coronavirus has triggered a global slowdown and has rendered ongoing business operations of several organisations to almost a standstill. This has resorted them to invoking the ‘force majeure’ clause to seek some relief.

    Practice question for mains:

    Q) What is the doctrine of Force Majeure and Frustration of a Contract? Discuss how it can worsen the NPA crisis in India.

    What is Force Majeure?

    • Force majeure is purely a contractual remedy available to an affected party under a contract and for seeking relief, the reference would be to the express terms of the contract.
    • It is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled.
    • While force majeure has neither been defined nor specifically dealt with, in Indian statutes, some reference can be found in Section 32 of the Indian Contract Act, 1872 (the “Contract Act”).
    • It envisages that if a contract is contingent on the happening of an event which event becomes impossible, then the contract becomes void.

    Where are such clauses found?

    • Force majeure clauses can usually be found in various contracts such as power purchase agreements, supply contracts, manufacturing contracts, distribution agreements, project finance agreements, agreements between real estate developers and home buyers, etc.

    Circumstances qualified for force majeure

    • A force majeure clause typically spells out specific circumstances or events, which would qualify as force majeure events, conditions which would have be fulfilled for such clause to apply.
    • As such, for a force majeure clause to become applicable the occurrence of such events should be beyond the control of the parties.
    • The parties will be required to demonstrate that they have made attempts to mitigate the impact of such force majeure event.
    • If an event or circumstance qualifies, the consequence would be that parties would be relieved from performing their respective obligations to be undertaken by them under the contract.

    Why it is in news, now?

    • Due to the lockdown restrictions placed by the government, the parties’ ability to perform and fulfil their contractual obligations is affected.
    • Where the contract does not specifically cover the current situation is a matter of debate.
    • The Indian Contract Act, 1872 is more than a century old and does not have any specific provisions relating to suspension of contracts or termination of contracts in cases of a pandemic.
    • The Act clearly provides that an agreement to do an act impossible in itself is void (Section 56).
    • After a contract is made, if any act becomes impossible or unlawful by reason of some event, such a contract becomes void.

    What is the difference between force majeure and frustration of a contract?

    • Under the doctrine of frustration, the impossibility of a party to perform its obligations under a contract is linked to the occurrence of an event/circumstance subsequent to the execution of a contract and which was not contemplated at the time of execution of the contract.
    • However, under in case of a force majeure, parties typically identify, prior to the execution of a contract, an exhaustive list of events, which would attract the applicability of the force majeure clause.
    • The doctrine of Frustration renders the contract void and consequently, all contractual obligations of the parties cease to exist.

    What did the Supreme Court say?

    • Recently, the Supreme Court observed that the doctrine of frustration as enumerated in the Act would apply only where the parties have not specified the consequences of an event which renders the performance of the contract impossible.
    • Termination of a frustrated contract would be possible only in cases where the contract becomes impossible to perform which means the damage to the contract should be of permanent nature and not something which can be performed with the passage of time.
    • Hence a temporary inability or force majeure event would not qualify under the doctrine.

    What lies ahead?

    • The force majeure clause in contracts should not be misconstrued as an event of frustration covered under the Act.
    • Force majeure is purely a contractual remedy available to an affected party under a contract and for seeking relief; the reference would be to the express terms of the contract.
    • However, a party claiming frustration of contract and seeking to escape liability or other obligation under a contract will necessarily have to approach an appropriate judicial forum.
    • It is likely that ‘force majeure’ clauses in contracts need to be more heavily negotiated to include references to epidemics or pandemics, in addition to other situations.