The Bombay High Court dismissed the UP Assembly Secretariat’s petition under Section 34 of the Arbitration and Conciliation Act, 1996, thereby upholding the arbitral award in favour of TCS. The dispute arose from a contract whereby TCS had been engaged to conduct an online recruitment examination for Review Officers and Assistant Review Officers for the UP Assembly Secretariat. The agreement provided for payment at a rate of ₹350 per candidate per session. The exam was conducted with over 7,000 candidates in December 2015, and subsequently, TCS submitted invoices totalling approximately ₹3.11 crore for its services.
However, in 2016 the contract was terminated by the Secretariat on the grounds of alleged irregularities in a separate Railway Recruitment Board (RRB) exam conducted by TCS. The Secretariat declined payment for the online exam it had itself commissioned and completed. In response, TCS initiated arbitration under the terms of the contract. The arbitrator found that TCS had fully performed its contractual obligations — the exam had been conducted — and that the termination was unlawful. The award directed payment to TCS accordingly.
Challenging the award, the UP Assembly Secretariat argued that the cancellation of the examination made the contract “useless,” invoking the doctrine of frustration under Indian Contract Act, 1872 (Section 56). It contended that as the exam’s results would no longer be used or published, the contract’s purpose stood frustrated, relieving it of the obligation to pay TCS. The Secretariat also questioned the identity of the contracting entity — claiming that the agreement was with the Secretariat alone (not the State) — and argued that at best TCS was entitled only to reimbursement of its expenses rather than the full contract amount.
The Bombay High Court rejected these arguments. The Court held that the Secretariat’s decision to cancel the exam was a self-induced act — a voluntary decision, not an external or unforeseeable event. It observed that the exam had already been conducted by TCS; only the administrative step of result-publication remained pending. Hence, performance under the contract had essentially been completed by TCS. In such circumstances, the contract did not stand frustrated under Section 56. The Court referenced established legal principles, including a precedent from the Boothalinga Agencies v. State of Karnataka, to underscore that self-induced frustration cannot be invoked to absolve contractual obligations.
Additionally, the Court noted that for enforcement of the award, the Secretariat cannot be treated as a separate legal entity distinct from the State government. It invoked prior Supreme Court authority which holds that the term “Government” encompasses legislature-related entities as well, thereby validating the arbitrator’s jurisdiction and the enforceability of the award against the Secretariat.
On the question of entitlement, the Court found that since TCS had completed performance, it was entitled to the full contract price, not merely reimbursement of costs. The Court dismissed any argument that Section 70 (which deals with refund of benefit obtained under void or voidable contract) should apply; a valid commercial contract existed, and thus the special restitution provisions were inapplicable.
Accordingly, the High Court dismissed the Section 34 challenge and directed that the arbitral award be enforced. The Secretariat’s cancellation of the exam and subsequent refusal to pay was held to be unjustified. The decision affirms that parties cannot avoid payment obligations simply by invoking frustration, especially when the cause of frustration is voluntary or self-induced.
The judgment reinforces a well-settled principle: where a party completes performance under a contract, and the other party’s refusal to proceed stems from its own choices, the performing party remains entitled to payment as agreed.
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