INDIA Law and Practice Contributed by: Gautam Bhatikar, Deeksha Dev Singh and Isha Patil, Phoenix Legal
8. Implications of Non- Performance, the IMO 2020, Trade Sanctions and the War in Ukraine 8.1 Force Majeure and Frustration In India, the non-performance of a shipping con - tract due to the implications of the COVID-19 pandemic, such as late delivery, non-arrival of a chartered vessel or a slow rate of loading or discharging, may be considered as either force majeure or frustration, depending on the specific circumstances of each case. Force Majeure The Indian Contract Act, 1872, provides for the doctrine of force majeure, which excuses a party from performance of its contractual obligations if the non-performance is due to an event that is beyond the control of the party. Non-perfor - mance of a shipping contract due to late deliv - ery, non-arrival of a chartered vessel, or slow loading/discharging may be considered force majeure if the contract explicitly includes a force majeure clause covering unforeseen events beyond the parties’ control, such as natural dis - asters, war, government actions, strikes or port closures, and if the event directly prevents or delays performance. Frustration Non-performance of a shipping contract could be considered “frustration” under Section 56 of the Indian Contract Act, 1872, which recog - nises the doctrine of frustration. This provision holds that an agreement to perform an act that is impossible in itself is void. Additionally, if a contract formed to do an act becomes impossi - ble or unlawful due to events beyond the promi - sor’s control, it becomes void at the point the act becomes impossible or unlawful. Courts assess the specific circumstances, including the terms of the contract and the presence of
constituted. Therefore, parties to foreign-seat - ed arbitrations can obtain interim relief (under Section 9) from Indian courts, unless there is an agreement excluding such remedy. 7. Ship-Owners’ Income Tax Relief 7.1 Exemptions or Tax Reliefs on the Income of Ship-Owners’ Companies In India, certain tax benefits are available for shipping companies incorporated in India for the income earned by their vessels. • Tonnage tax: this is a special tax regime applicable to shipping companies, under which the income of the company is taxed at a fixed rate based on the tonnage of the ves - sels owned by the company rather than the actual income earned by the company. • Accelerated depreciation: shipping com - panies incorporated in India are eligible for accelerated depreciation on the vessels owned by them. This means that the cost of the vessels can be written off over a shorter period of time, thus reducing the taxable income of the company. It is important to note that the availability of these tax benefits is subject to certain conditions and the provisions of the Income Tax Act, 1961, and the relevant rules and regulations. Companies are advised to seek professional tax advice to determine their eligibility for these benefits and the exact provisions applicable to them.
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