What happens if an unforeseen event makes performance impossible?

If the contract has a force majeure clause, its terms decide what happens, read under section 32 of the Indian Contract Act. If it does not, the contract may be frustrated under section 56 when performance becomes impossible, but the threshold is high: in Energy Watchdog v. CERC (2017) the Supreme Court held that a rise in cost, or performance becoming more onerous, does not by itself frustrate a contract. A clearly drafted force majeure clause with a notice procedure is the safer course.