"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well."

-Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Monday, November 23, 2020

Guest Post: Are Standstill / Tolling Agreements recognised in India?

 [This is a guest post by Mr. Vigneshwar Ramasubramanian on the validity of standstill/ tolling agreements that seek to contractually deal with the law on limitation. Mr. Vigneshwar Ramasubramanian is an advocate of  the Madras High Court]


Are Standstill / Tolling Agreements recognised in India?

Earlier, the moderator of the blog argued here that parties to a dispute can be allowed to contractually agree to extend, freeze or otherwise alter the law of limitation mutually in India. In commercial law, these contracts, which intend to freeze/extend limitation periods are referred to as ‘Standstill Agreements’. The author eloquently argues through a host of foreign jurisprudence that the Limitation law is not something sacred or sacrosanct that parties should not be allowed to contract around. The author also relies on Section 25(3) of the Indian Contract to buttress his argument.

Below, I will make an attempt to first, argue that the treatment of Limitation Act by courts in India are substantially different from the treatment of the law of Limitation in foreign jurisprudence. Secondly, I will try to put forth an alternate interpretation to learned author’s reading of Section 25(3) and Section 28 of the Contract Act.

International Practice v. India

It is a common practice in Arbitrations for both parties to mutually give up their plea of limitation.But, in India, courts are bound to give effect to the provisions of the Limitation Act of its own motion. The judgment recognising ‘Standstill Agreement’ cited by the Ld. Author cannot be applied in our context. The author relies on the judgment of the England and Wales High Court (Technology and Construction Court), decision in Oxford Architects Partnership v Cheltenham Ladies College, wherein it was held:

The Limitation Act 1980 provides a statutory defence which a party may rely on. A party is not obliged to rely on a statutory limitation defence but is generally entitled to do so. It is possible for a party to agree that it will not rely on a statutory limitation defence or for the parties to agree that a statutory limitation defence will apply from an agreed date, for instance in a standstill agreement. In certain circumstances a party may be precluded from relying on a statutory defence because of an estoppel. However, absent such an agreement or an estoppel a party is entitled to rely on a statutory limitation defence. In common with all other such rights any provision which seeks to exclude a party's right to rely on a statutory limitation defence must do so in clear terms.”

The above interpretation would fall foul of the Indian Limitation Act on two fronts. Firstly, under the Indian Limitation Act, plea of limitation is mandatory. Even if the parties are not obliged to rely on the plea, it is the duty of the court to give effect to the Limitation Act.

Section 3(1) of the Limitation Act, 1963 reads:

3. Bar of limitation—(1) Subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence.”

Explaining the above provision, the Supreme Court in Manindra Land & Building Corporation Ltd. v. Bhutnath Banerjee held:

"Section 3 of the Limitation Act enjoins a Court to dismiss any suit instituted, appeal preferred and application made, after the period of limitation prescribed therefore by Schedule I irrespective of the fact whether the opponent had set up the plea of limitation or not. It is the duty of the Court not to proceed with the application if it is made beyond the period of limitation prescribed."

Therefore, there is no way a party can mutually agree to not raise a plea of limitation. Second, the parties cannot mutually agree a date from which a limitation period shall begin. The Limitation Act, 1963 itself sets the period from which the limitation period will begin in the Schedule to the Act. The only exceptions are laid down in Part III of the Limitation Act, 1963. Therefore, when there are extensive, comprehensive provisions detailing the period from which period of limitation shall run, in India, the parties cannot contract around it. Internationally though, the Limitation statutes are directive. For instance, the Singapore statute of limitation permits their court to discuss the issue of limitation only if it is expressly raised by the parties. Section 4 of the Singapore Limitation Act, 1959 reads:

Limitation not to operate as a bar unless specially pleaded:

4.  Nothing in this Act shall operate as a bar to an action unless this Act has been expressly pleaded as a defence thereto in any case where under any written law relating to civil procedure for the time being in force such a defence is required to be so pleaded.”

Similarly, the statute of Limitation in Australia has an expression provision which recognises the right of the parties to extend or shorten a limitation period. Section 5 of the Australian Limitation Act, 2005 reads:

45 (1) Nothing in this Act prevents a person from agreeing to extend or shorten a limitation period provided for under this Act.

Practices of other countries, including the USA, have been laid down by the author in his article. But, their interpretations cannot be applied for the two reasons laid above. When the parties can neither mutually agree to drop the plea of limitation, nor agree a date from which a limitation period shall begin, the very purpose of a Standstill Agreement itself is extinguished.

Whether the Indian Contract Act permits circumventing the law of limitation?

The second major argument of the author is through an interpretation of Section 28 and Section 25(3) of the Indian Contract Act, 1872. Section 28 of the Indian Contract Act reads:

28: Agreements in restraint of legal proceedings, void. Every agreement,

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights;

The argument is that this provision merely precludes parties from limiting the time within which a claim must be made. In other words, this provision only precludes the ‘shortening’ of limitation period. If the intention of the legislature was to prevent parties to contract around or extend the limitation periods as well, it would have been manifest in this provision.

There is no doubt that an agreement for a longer period of limitation than the law allows, does not lie within the scope of this section. In fact, seeking a longer period of limitation keeps the right to sue subsisting even after the period of limitation. There is absolutely no restriction imposed on the right to sue. However, such an agreement will be void under Section 23 of the Indian Contract Act as tending to defeat the provisions of the Limitation Act. The devil, i.e., Section 3 of the Limitation Act, clearly provides that every suit instituted after the period of limitation prescribed (by the Act) shall be dismissed, although limitation has not been set up as a defence. Therefore, a Tolling or a Standstill agreement cannot escape the clutches of Section 23 of the Indian Contract Act. The Ld. Author’s stand that the intention of the legislature is to merely preclude parties from limiting the period of limitation alone stands on feeble ground. Section 45 of the Australian Limitation Act seen above clearly permits parties to agree & shorten the period of limitation. Similar position is manifest in other jurisprudences as well. Therefore, a stand that parties cannot limit the time, but may be permitted to extend the period of limitation, does not seem accurate. Especially in light of Section 3 and the Schedule attached to the Limitation Act, 1963.

The author goes on to say that Section 25(3) of the Indian Contract Act, 1872 is an important example of a provision by which parties can agree that one of them would pay a time-barred debt. In other words, Section 25(3) allows parties to contract around the law of limitation. Section 25(3) of the Limitation Act reads as:

25. Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law. An agreement made without consideration is void, unless;

(3) It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.”

To invoke the provisions of Section 25(3), the most important condition is that there has to be a debt expressly acknowledged which the creditor but for the period of limitation, might have enforced. The key herein is existence of a debt and express acknowledgement of the same. The concept of a Standstill Agreement though, stands on an entirely different footing.

Standstill Agreements enable the parties to focus on the pre-action protocol requirements without worrying about limitation. Parties to a dispute may choose to enter into a standstill agreement where they are approaching the expiry of the limitation period, but the claimant is not yet ready to issue its claim (because, for example, the parties are in negotiations which, if successful, would prevent a claim from needing to be issued at all).  Parties usually quantify the debt through evidences etc., and ascertain the liability of the debtor in this period. When the debt is ascertained and acknowledged, there is no question of limitation at all. Section 18 of the Limitation Act expressly provides that the period of limitation begins from acknowledgment of such liability in writing. But, a standstill agreement, is entered into to prevent the claimant’s expiry of the right to sue. Therefore, one cannot interpret Section 25(3) to contract around the law of limitation either.

Conclusion

Shortening the period of limitation is expressly barred under Section 28 of the Contract Act and extending limitation is impermissible upon an interpretation of the Indian Limitation Act. Most advanced jurisdictions have a limitation period of Six (6) years whereas here, for most claims, the period is Three (3) years only. Over this, we have not recognised Standstill/Tolling agreements as well which, as seen earlier, is an internationally recognised practice. This has led to considerable scepticism for parties, especially those across the border to negotiate in good faith with their Indian counterparts, reducing the scope for out of court settlements in International Disputes. In this context, it is paramount that the legislature carves out an exception for Standstill Agreements under the Limitation Act, or, we receive some judicial guidance on the validity of such agreements.

Friday, September 11, 2020

Guest Post: Compilation of Decisions on Covid19 & Force Majeure (April- August 2020)

 [This guest post by Mr. Pascal Sasil R, student, School of Law, CHRIST University, compiles prominent decisions by Indian courts on Covid19 and Force Majeure. The compilation is a useful material for those researching on this area.]

Compilation of Force Majeure Cases

 Force Majeure, a legal jargon has become quite relevant among the masses following the pandemic scare and its relevance in contract law. Force Majeure in literal language signifies an Act of God, which leads forth to unforeseeable circumstances that prevent someone from fulfilling a contract. With supply chains being disrupted all over the world[1], performances under these contracts have also come to a standstill. It is at this point, Force Majeure clause comes in and the invoking of the same in a contract seems justified, considering the potential emergency like situation at hand. However, there are a lot of concerns surrounding the clause and its terms of implementation. Some of these include dealing with unwarranted use of the Force Majeure clause in an attempt to do away with contracts that have turned unfavorable, approaching contracts that do not have a Force Majeure clause in place, cross border contracts and subsequent issues such as extent of damage due to COVID-19 in a particular country and its impact on performance of any contract, so on and so forth.

Here is a detailed analysis of cases that have come up for hearing in various High Courts of India during the period of March-July 2020. The said cases have thrown some light on COVID-19 as a Force Majeure event and the description/applicability/ambit of Force Majeure in  general. Apart from contractual clauses, the aspect of Force Majeure has also been considered in general. Few criminal cases too find the mention of COVID-19 as a Force Majeure event, when the said Court has gone into discussions pertaining to reasons for grant of bail and Right to liberty in the event of a Force Majeure. The table of the case, the issues raised, and the outcome of the said cases have been presented herein these documents.

Month of March:

S. No.

Court

Name of the Case [Citation]

Facts/Issues/Claims

Outcome

1

GAUHATI HIGH COURT

 

Raitani Engineering Works Pvt. Ltd. v. The Union of India and Anr.

 

[Arb.P. 12/2018]

 

 

The Arbitral Tribunal failed to consider Clause 17 of the GCC of 1998. (The Force Majeure Clause)

The impugned award passed by the learned Arbitral Tribunal is against Public Policy of India and as such the same is liable to be set aside. 

 

Hon'ble Mr. Justice P. C. Phukan (retired) of the Gauhati High Court is appointed as the sole Arbitrator.

 

 

 

 

2

MANIPUR HIGH COURT

Simplex Projects Ltd. through its Director Office v. State of Manipur through its Chief Secretary

 

[MANU/MN/0048/2020]

 

 

Termination of Contract by the Respondent despite invocation of the FM Clause and request for an extended period of time to perform the obligations.

Termination was upheld since a reasonable period of time was given to the Petitioner and the Petitioner failed to comply with the same and was not keen on executing the obligations.

3

HIGH COURT OF

BOMBAY

 

Standard Retail Pvt. Ltd. and Ors. vs. G.S. Global Corp. and Ors.

 

[MANU/MH/0528/2020]

 

 

Termination of Contract by the Petitioner on grounds of COVID-19 lockdown and thereby invoked the Force Majeure Clause.

FM clause was applicable only to the respondents, according to the Contract.

 

The steel from South Korea had already been shipped, essential services allowed at Mumbai Port and Steel falls under essential services.

 

Invocation of Force Majeure clause invalid and was escapism on part of the Plaintiff to refrain from executing those obligations.

 

 Month of April:

 

S. No.

Court

Name of the Case (Citation)

Issues

Outcome

1

HIGH COURT OF

BOMBAY

Integral Industries Pvt. Ltd vs Gs Global Corp And Others

 

[COMMERCIAL ARBITRATION PETITION (L) NO. 406 OF 2020]

Termination of Contract by the Petitioner on grounds of COVID-19 lockdown and thereby invoked the Force Majeure Clause.

FM clause was applicable only to the respondents, according to the Contract. The steel from South Korea had already been shipped, essential services allowed at Mumbai Port and Steel falls under essential services.

 

 

Invocation of Force Majeure clause invalid and was escapism on part of the Plaintiff to refrain from executing those obligations.

2

HIGH COURT OF

BOMBAY

Vinayaga Marine Petro Ltd And Anr vs Gs Global Corp. and Others

 

[COMMERCIAL ARBITRATION PETITION (L) NO. 405 OF 2020]

Termination of Contract by the Petitioner on grounds of COVID-19 lockdown and thereby invoked the Force Majeure Clause.

FM clause was applicable only to the respondents, according to the Contract.

 

The steel from South Korea had already been shipped, essential services allowed at Mumbai Port and Steel falls under essential services.

 

 

Invocation of Force Majeure clause invalid and was escapism on part of the Plaintiff to refrain from executing those obligations

3

HIGH COURT OF

BOMBAY

Haryana International Pvt. Ltd. v. Hyundai Corporation And 2 Ors

 

[COMMERCIAL ARBITRATION PETITION (L) NO. 404 OF 2020]

Termination of Contract by the Petitioner on grounds of COVID-19 lockdown and thereby invoked the Force Majeure Clause.

FM clause was applicable only to the respondents, according to the Contract. The steel from South Korea had already been shipped, essential services allowed at Mumbai Port and Steel falls under essential services.

 

 

Invocation of Force Majeure clause invalid and was escapism on part of the Plaintiff to refrain from executing those obligations

4

HIGH COURT OF DELHI

Halliburton Offshore Services Inc. vs Vedanta Limited & Anr.

 

[MANU/DE/0957/2020]

 

 

Petitioner invokes FM Clause of the Contract. Respondent does not consent to the same, keen on invoking or encashing eight bank guarantees.

Ad interim stay on invocation and encashment of the eight Bank guarantees granted, following invocation of Force Majeure Clause by the Petitioner.

5

HIGH COURT OF DELHI

Jr Toll Road Private Limited v. Yes Bank Limited

 

[W.P.(C) 2970/2020]

Petitioner’s Account listed as Non-Performing Assets following non-payment of dues. Loan granted for contract. Contract stalled briefly as the FM clause was invoked.

Status quo ante granted on status of Bank Accounts.

 

Earlier delays in payment of dues until the 31st of December 2019 cannot be brought under the ambit of Force Majeure and hence petitioner directed to liquidate the amounts due and payable within five weeks from the date on which the said assets became functional. (The Toll Plazas in this said case)

6

HIGH COURT OF DELHI

MEP Infrastructure Developers Ltd. v. South Delhi Municipal Corporation and Others

 

[W.P. (C) No. 2241/2020]

 

 

Petitioner found liable for non-payment of amounts prior to the lockdown and hence Force Majeure cannot be a valid claim for postponing Notice Inviting Tenders.

The existing Force Majeure situation has to be taken into account while deciding on effect to the termination of the Toll Tax Collection Agreement.

 

Respondents shall go ahead with its NIT and finalize the tender; the effective date of the termination would stand postponed. Mere Non-payment does not explicitly amount to default of payments.

7

HIGH COURT OF DELHI

PKSS Infrastructure Private Ltd. v. South Delhi Municipal Corporation

 

[MANU/DE/1056/2020]

 

Petitioner claims for postponement Notice Inviting Tenders owing to Force Majeure Situation.

Respondents shall go ahead with its NIT and finalize the tender; the effective date of the termination would stand postponed. Government has to function even during such emergency situations.

 

Petitioner’s act of not participating and lack of intention to participate in the bid, courtesy of non-payment of amounts questioned and hence petition stands dismissed.

 

Genuine interest and interest needs to be shown even though circumstances that exist in the country evoke a sympathetic approach at the first instance.

8

HIGH COURT OF DELHI

Indrajit Power Private Limited vs Union Of India

 

[MANU/DE/0979/2020]

Request for stay on the encashment and appropriation of Bank Guarantee and the request for renewal at a later date due to prevailing  Force Majeure situation.

Petitioner company found in non-compliance of Milestones since April-June 2018 and further despite extension of 12 months, its position remained the same.

 

Thus, the orders passed by the Hon’ble Supreme Court and the High Court of Delhi pertaining to the Force Majeure and subsequent Lockdown situation are not applicable in this present case. Force Majeure clause cannot be invoked as means for escapism.

Month Of May:

 

S. No.

Court

Name of the Case (Citation)

Issues

Outcome

1

HIGH COURT OF  ALLAHABAD

 

Rinku Gupta v. State of U.P.

 

[CRIMINAL MISC. BAIL APPLICATION No. - 55618 of 2019]

 

 

Bail on grounds of existing Force Majeure Situation,

Looking to impediments in arranging sureties because of lockdown, while invoking powers under Article 226 and 227 of the Constitution of India, the Hon’ble High Court deemed it appropriate to order that all the accused-applicants whose bail applications came to be allowed on or after 15th March, 2020 but have not been released due to non-availability of sureties as a consequence to lockdown may be released on executing personal bond as ordered by the Court or to the satisfaction of the jail authorities where such accused is imprisoned, provided the accused-applicants undertakes to furnish required sureties within a period of one month from the date of his/her actual release.

 

The interest of justice lies first in preserving the liberty of the applicant and hence entitled to be released on Bail owing to the COVID-19 and Force Majeure situation.

2

HIGH COURT OF JHARKHAND

Damodar Valley Corporation v.  Gautam Ferro Alloys

 

[MANU/JH/0174/2020]

Whether order from a statutory body, restarting performance under a contract falls under the ambit of Force Majeure?

Restrainments from Statutory bodies fall under the ambit of Force Majeure. The same is beyond the reasonable control of the Petitioner.

 

Even though the respondents might have suffered losses, Petitioner had no role in it. Hence, not liable to make payments, in accordance with the obligations under the contract.

3

HIGH COURT OF CHHATTISGARH

Enchanting Diaries Hotels And Resorts Private Limited v. Chhattisgarh Tourism Board

 

[MANU/CG/0394/2020]

 

 

Unilateral termination of the contract awarded to the petitioner, forfeiting the performance security furnished in connection with the same. Request for issuance of a written notice and request categorize the issue under 'Force Majeure'

Even though it is owing to Force Majeure situations, agreed dispute settlement measures under the Contract cannot be bypassed and overlooked. Matter referred to Arbitration as provided under the original contract.

 

Status Quo issued on the EMD/Security Deposit till the deliverance of an arbitral award within one month’s time, as directed by the Hon’ble Court.

4

High Court of Patna

Kaalendi Ventures LLP v. The State Of Bihar

 

[Civil Writ Jurisdiction Case No.5684 of 2020]

 The maximum demand charges and electricity consumption charges have been raised for the month of April by the Respondent despite prevailing Force Majeure situation and non-operation of the plant. Request for invocation of Force Majeure Clause contained under Chapter VII of the Electricity Supply Code turned down by the Respondents.

Interim stay on the payment of due amount. However,  actual electricity consumption charges, post lockdown period, to be paid within 10 days from the date of passing of interim order.

5

HIGH COURT OF DELHI

Ramanand & Ors vs Dr Girish Soni & Anr

 

[MANU/DE/1072/2020]

Request for suspension in full/part of the rent to be paid by the petitioner owing to the COVID-19 situation and request to consider the same as a Force Majeure Event.

In the absence of a contract, Section 56 of the Indian Contract Act cannot be invoked. Also, Section 108(B) (e) of the Transfer of Property Act cannot be invoked as the said property is not destroyed in full.

 

Mere non-usage does not amount to destruction. In the absence of a contract or a contractual stipulation, the tenant may generally seek suspension of rent courtesy of Force Majeure situation and subsequent temporary non-use of premises, by invoking the equitable jurisdiction of the Court.

 

The Tenants' application for suspension of rent is liable to be rejected inasmuch as while invoking the doctrine of suspension of rent on the basis of a force majeure event, it is clear from the submissions made that the Tenants do not intend to surrender the tenanted premises.

 

Hence, Tenants shall pay the use and occupation charges as directed by the Court at an extended time frame. Post-lockdown, strict adherence to the originally existing pattern of payment,

6

HIGH COURT OF DELHI

Polytech Trade Foundation vs Union Of India & Ors

 

[W.P.(C) 3029/2020]

Injunction/ restraint order against the Respondents, under Section 151 of CPC. Respondents blocking the lifting of material from ports citing non-payment of penal charges by the Petitioner in their ports. Petitioner calls for exemption owing to COVID-19 situation and requests for Force Majeure invocation.

The Central Government had issued a slew of directives in the form of Orders and letters from the Ministry of Shipping, Ministry of Finance, and a Ministry of Home Affairs Order invoking Section 53 of Major Port Trust Act 1963, allowing for no extra penalties in the event of delays. However, it remains to see if these are binding in nature.

 

No grounds for grant of injunction/restrain order in favour of the petitioner owing to the fact that no irreparable loss is going to be caused to the petitioner if the court finally comes to a conclusion that these letters were not in the form of advisories/guidelines but were in fact binding directions, that is, the petitioner can recover the ground rent/penal charges paid by them to respondent.

 

Hence, order of restraint on account of the Force Majeure situation was not granted. Case listed to a later date.

7

HIGH COURT OF RAJASTHAN

State Of Rajasthan vs Galaxy Mining And Royalties

 

[Spl. Appl. Writ No. 301/2020]

Appeal by the State against learned Single Judge’s interim stay on termination of contracts for non-performance owing  to Force Majeure situation.

Opinion regarding treating COVID-19 as  Force Majeure event:

The prevailing COVID-19 Pandemic is an extraordinarily compelling situation, which we have not faced for decades together. Drastic measures were required to be taken and severe lockdowns were imposed by the Central and the State Governments to save the lives of the people.

For all practical purposes, businesses in the country were crippled. The lockdown has been lifted but with severe restrictions and routine life of the people is limping back to normal at a painfully slow pace.

Fully functional operation of businesses including the mining operations/royalty collection is not possible even as on date because still some restrictions are in place.

Thus, the collection of royalty amount under the contracts in question shall be commenced within a period of three days from the date of order. Outstanding dues prior to the lockdown to be cleared off in three days time. Learned Single Judge’s interim order stands modified.

 

8

HIGH COURT OF DELHI

Halliburton Offshore Services Inc. vs Vedanta Limited & Anr.

 

[MANU/DE/1130/2020]

Request for restrain on invocation of bank guarantees.

Interim relief on the invocation of bank guarantees granted.

 

Observation on Force Majeure:

 

The Delhi High Court observed that the country wide lockdown was prima facie, in the nature of Force Majeure. Therefore, it could be said that special equities do exist, as would justify grant of the prayer, to injunct invocation of the bank guarantees.

 Month of June, July, August:

S. No.

Court

Name of the Case [Citation]

Facts/Issues/Claims

Outcome

1

HIGH COURT OF DELHI

 

 

Bharat Heavy Electricals Limited v. Egyptian Electricity Transmission Company & Ors.

[MANU/DE/1136/2020]

 

 

 

 

 

 

 

 

Plaintiff seeking permanent injunction to restrain defendant No.1 from encashing the bank guarantees in question.

Plaintiff claims that Egypt is undergoing a war like situation which constitutes a force majeure situation and hence irreparable harm shall be caused to the Plaintiff if the Hon’ble Court does not grant those reliefs prayed for.

Hon'ble High Court confirmed the interim order passed, subject to the following terms:

i) The plaintiff shall not object to appointment of a local commissioner at its cost for recording of the evidence after framing of issues.

ii) The learned local commissioner so appointed by this court, after framing of issues, will complete recording of evidence within nine months thereafter.

iii) No adjournment would be sought by the plaintiff before the learned local commissioner for recording of evidence.

 

2

HIGH COURT OF DELHI

 

Steel Authority Of India Ltd, India v. Tata Projects Ltd, India and Anr.

[OMP (COMM) 418/2020, IA 3983/2020]

 

 

Petitioner seeks exemption from depositing money / liquid cash on account of financial stress / liquidity crunch posed by COVID-19 on account of absence of domestic and international demand, which has constrained the petitioner to increase its borrowing, with heavy interest.

Petitioner further cites notifications issued by the Minister of Finance, recognising COVID-19 as a Force Majeure event and clearing the air on the invoking of Force Majeure Clause.

The petitioner prays to the Hon'ble Court to exercise its discretion by staying the impugned award and permitting the petitioner to secure the respondent's interest by way of Bank Guarantees for the said amount awarded in the impugned award by June 21, 2020.

The court accordingly directed the petitioner to deposit 50% of the awarded amount with the Registrar General of the Court and asked the Petitioner to furnish a bank guarantee for the balance 50% in favour of the Registrar General within three weeks from the date of the judgement.

Furthermore, the Hon’ble Court held that on such deposit, there shall be stay of the operation of the impugned award dated November 20, 2019.

However, the respondents were instilled with the rights to file an application for withdrawal of the deposited amount for the consideration of the Court.

3

HIGH COURT OF DELHI

 

91 Springboard Business Hub Pvt. Ltd. v. Delhi Printing And Publishing Company Pvt. Ltd.

 [OMP(I)(COMM) 132/2020, IA 4425/2020 & 4426/2020]

 

 

 

 

Petitioner seeks an order of restraint on the respondents  from and in any manner interfering in the ingress/ egress of the Petitioner, its agents, employees etc, from and to the premises.

The petitioner also seeks for removal of locks from the main entrance on the premises, claimed to be unlawfully placed by the respondents after termination of the lease deed and forfeiture of the security deposit.

Petitioner further claimed that there was a stipulation of force- majeure clause in the lease deed and that COVID-19 was an event of force-majeure and because of which the obligations under the lease deed should get suspended.

Sole Arbitrator appointed by the Hon’ble Court to sort out the indifferences. Locks to be broken open.

The respondents, their agents, employees, servants shall not interfere with the ingress / egress of the petitioner, its agents, employees from and to the premises.

Petitioner directed to pay to the respondents proportionate rent for the month of May, 2020 effective from 18th and for the month of June, 2020 and the same to be paid to the respondents on or before June 22, 2020, in view of COVID-19 and Force Majeure situation.

4

HIGH COURT OF DELHI

 

MEP Infrastructure Developers Ltd. v. South Delhi Municipal Corporation and Others

[MANU/DE/1229/2020]

 

 

 

 

 

Petitioner found liable for non-payment of amounts prior to the lockdown and hence Respondent claims that Force Majeure cannot be a valid claim for non-payment.

The Hon’ble Court held that the  question as to whether COVID-19 would justify non- performance or breach of a contract has to be examined on the facts and circumstances of each case.

It further iterated that every breach or non-performance cannot be justified or excused merely on the invocation of COVID-19 as a Force Majeure condition.

It ascertained that the Court would have to assess the conduct of the parties prior to the outbreak, the deadlines that were imposed in the contract, the steps that were to be taken, the various compliances that were required to be made and only then assess as to whether, genuinely, a party was prevented or is able to justify its non- performance due to the epidemic/pandemic.

Furthermore, it stated that it is the settled position in law that a Force Majeure clause is to be interpreted narrowly and not broadly. Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations.

Furthermore, it was said that as observed in the landmark Energy Watchdog case, it was not in the domain of Courts to absolve parties from performing their part of the contract.

It is also not the duty of Courts to provide a shelter for justifying non-performance.

There has to be a „real reasons and a real justification which the Court would consider in order to invoke a Force Majeure clause.

The said amounts in accordance with the interim order ought to be paid as directed in the interim order.

However, weekly payments of Rs.20 crores stand relaxed in view of the force majeure clause.

 

5

HIGH COURT OF DELHI

 

Rashmi Cement Ltd. vs World Metals & Alloys (Fzc) & Anr.

[MANU/DE/1269/2020]

 

 

 

 

 

 

Petitioner seeks direction to the respondent to release the cargo to the petitioner without insisting on payment of demurrage.

The petitioner's primary ground for seeking the same is that it stood absolved of its contractual obligations to take delivery immediately on the arrival of the vessel at the Haldia Port on account of the nation- wide lockdown and also of its liability to pay contractual demurrage by reason of the concessions granted by the Ministry of Shipping in its circulars, announcing COVID-19 as a Force Majeure event.

No prima facie case in the petitioner's favour on the applicability of the Force-Majeure clause or its claim for exemption from paying demurrage.

Learned Single Judge deliberately refrained from expressing any conclusive opinion on the general conditions of applicability/ non-applicability of the Force-Majeure clause.

Furthermore, the petitioner has failed to substantiate that it would incur irreparable injury or loss if the interim relief it seeks by way of this Section 9 petition is not granted by this Court. Thus, the petitioner has failed to satisfy the parameters for grant of interim reliefs and hence no relief granted.

It was also directed that in the event that it were to be held in the arbitration proceedings that no demurrage was in fact payable by the petitioner or it turns out that the vessel owner is exempted from the liability of paying demurrage, the amount paid by the petitioner to the respondent by way of demurrage would be refunded with interest at a rate determined by the learned Arbitrator.

6

HIGH COURT OF ALLAHABAD

Manikya Creation Pvt. Ltd vs Union Of India And 5 Others

[WRIT - C No. - 9940 of 2020]

 

Petitioner seeks quashing of the demand raised by respondent no.6 to towards rent and detention charges and claims it of  being in violation of the orders/directions issued by the Government of India, entailing COVID-19 as a Force Majeure Event.

Without entering into the merits of the claim of the petitioner for waiver/remission (of the ground rent/detention charges), the Hon'ble High Court ordered that the Respondent No.5 shall take an expeditious decision on the reply submitted by the petitioner, protesting against the demand notice charging ground rent and detention charges on storage of the cargo containers beyond the free period of fourteen days, at the ICD Dadri.

Respondent no. 5 directed to pass a reasoned and speaking order in accordance with law within a period of two weeks from the date of receival of order copy.

7

HIGH COURT OF ALLAHABAD

Chetan Overseas Delhi Pvt. Ltd. v. Union Of India And 4 Others.

[WRIT - C No. - 9702 of 2020]

 

The petitioner seeks a writ of mandamus commanding the Respondent nos. 1 to 4 to take appropriate penal action against the respondent no. 5 for not complying with the orders and advisories issued for waiving all charges pertaining to ground rent, demurrage, container detention charges or any other ancillary charges imposed during the lockdown period, due to the existing Force Majeure situation and release the containers and/or its contents to the owners/purchasers and also requests to direct the Respondent no. 5 to issue the delivery order on payment of usual charges by the petitioner allowing the detention free days and extending the benefits of orders and advisories issued by respondent nos. 1 to 4 to waive all charges pertaining to container detention charges or any other ancillary charges imposed during the lockdown period and release the containers and/or its contents to the petitioner.

Without entering into the merits of the claim of the petitioner for waiver/remission (of the ground rent/detention charges), the Hon'ble High Court ordered that the Respondent No.5 shall take an expeditious decision on the reply submitted by the petitioner, protesting against the demand notice charging ground rent and detention charges on storage of the cargo containers beyond the free period of fourteen days, at the ICD Dadri.

Respondent no. 5 directed to pass a reasoned and speaking order in accordance with law within a period of two weeks from the date of receival of order copy.

 

 

8

HIGH COURT OF DELHI

Shiva Industrial Security Agency (Guj.) Ltd.  vs National Highways Authority Of India

[W.P.(C) 3718/2020 & CM 13331/2020]

 

Due to the COVID-19 Pandemic, the petitioner invoked the Force Majeure Clause contained in the Agreement.

The respondent is yet to make a decision on the same. Similarly, certain other claims have also been raised by the petitioner, which are yet to be decided by the respondent.

The petitioner prays for release of the Performance Security submitted with the respondent as the period of Agreement has already ended.

 

Hon’ble Court directed the respondent to consider the representations of the petitioner and decide on the same within a period of three weeks from the date of order.

Respondent directed to not take any coercive action on the Performance Security deposited by the petitioner for a period of one week from the date of decision taken on such representations made by the petitioner, including those made pertaining to the invocation of the Force Majeure Clause in the Agreement.

9

HIGH COURT OF DELHI

Sahakar Global Ltd and Anr. vs National Highway Authority Of India and Anr.

[MANU/DE/1295/2020]

 

 

 

 

 

 

Petitioner had  lodged its claim for relief under the Force Majeure clause of the Contract, however, the respondent no.1 is yet to take a decision thereon.

Relief measures provided by the respondents, not in line with the contractual terms.

Respondent claims that Petitioners are also entitled to claim benefit under the Office Memorandum recognizing COVID-19 as a Force Majeure event since petitioners found in default prior to the COVID-19 impact too.

claim of the petitioners shall be considered strictly in accordance with the Contract executed between the petitioners and the respondent no.1 and the Contract provides for such consideration within a period.

respondent no.1 shall decide on the claims of the petitioners within a period of two weeks from today.

The petitioners, if aggrieved of the decision taken by the respondent no.1 on its claim under Clause 25 of the Contract, shall be free to agitate the same in accordance with law and in appropriate proceedings.

The petitioners shall, however, continue to deposit the admitted toll collected at various toll plazas with the respondent no.1, after deducting the retention amount as claimed by them during this period.

10

HIGH COURT OF DELHI

Cinepolis India Pvt. Ltd vs Sarita Multiplexes Pvt. Ltd

   [O.M.P(I)(COMM) 149/2020 and I.As. 4742-4743/2020]

 

 

 

Petitioner pleads that during the currency of the pandemic and continuance of the force majeure, the petitioner be exempted from its requirement to pay lease rent to the respondent.

Petitioner also prays for an ad interim order, restraining the respondent from terminating the Lease Deed, and from acting in furtherance of the termination notices dated 12 th May, 2020 and 6th June, 2020, and from alienating the premises, in which the petitioner is in occupation, to any third party, pending disposal of this petition, subject to his undertaking to deposit the lease rent, till date and till the disposal of this petition, with the Registrar General of this Court.

The Hon’ble High Court held that serious and disputed issues have arised in this case, regarding the applicability of the force majeure clause, and the consequent liability or otherwise, of the petitioner to deposit lease rent, as well as the applicability of the various decisions, on which the respondent relies.

It also held that in so far as the issue of non-performance, by the respondent, of its obligations under the Lease Deed is concerned, that would ideally form the subject matter of adjudication by the learned Arbitral Tribunal, which is yet to be constituted in the matter.

Thus, it was held that there shall be an ad interim stay on the respondent from terminating the Lease Deed subject to the petitioner depositing, within a period of two weeks, with the Registrar General of this Court, the entire balance lease rent, required to be paid to the respondent, as well as continuing to deposit, till the disposal of the OMP, the rent payable to the respondent for the occupation of the aforesaid premises as fixed in the Lease Deed.

The Hon’ble Court also opined that the said decision would not prejudice either party as were the respondent to succeed, the lease rent could be released to the respondent.

11

HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

 

Vinod Kumar vs. Union of India and Ors.

[MANU/PH/0700/2020]

 

Petitioner is aggrieved by circular dated 13.5.2020 issued by Real Estate Regulatory Authority, Punjab (RERA) whereby it extended the period of validity of registration of projects by six months in addition to the period that would be normally granted for processing the application provided application is made on payment of necessary late fee, owing to the fact that COVID-19 pandemic, presented a Force Majeure situation.

 

Petitioner also claims that the circular was issued to give relief to those projects whose registration was expiring on or before 15.3.2020.

However, by virtue of impugned circular which is in the nature of a notification even term of those projects whose registration has expired long back has been extended by six months.

Petitioner also claims that the power to issue circulars/notifications of this nature vests in the State Government and not in the adjudicatory bodies.

 

 

 

 

The Hon’ble opined that it failed to understand the need for passing an omnibus order giving protection to all the projects in the State of Punjab, particularly when the Act has a specific provision for entertaining an application on behalf of the promoter/builder for extension of time.

The Court also iterated that there was no doubt that the 'Force Majeure' clause can be invoked for this purpose.

However, the applicant who would approach the RERA would have to convince it that he has been forced by circumstances beyond his control to continue with the project.

 

The Hon’ble Court found it surprising that the circular may even give protection to those promoters/builders whose registration may have expired long back.

The intent of the advisory issued by the Government of India was certainly not to accommodate such defaulters.

Thus, the Court went on to stay the operation of the impugned circular dated 13.2.2020 and conclude that it found something palpably wrong with the circular.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


S. No.

Court

Name of the Case [Citation]

Issues

Outcome

1

HIGH COURT OF DELHI

Prakash Asphaltings And Toll Highways India Limited v. National Highways Authority Of India and Anr.

[W.P.(C) 3853/2020]

 

Petitioner seeks for a series of writs, directed at setting aside those office memorandums which in the view of the Petitioner imposes a unilateral condition /formula for payment of force majeure compensation in derogation of the contracts executed between tolling contractors (such as the Petitioner) and Respondent No.1 and towards setting aside of the direction issued by the Respondent to the Petitioner to replenish the cash performance security pertaining to various projects.

Respondent directed to decide on all such Force Majeure claims within a period of three weeks from the date of order.

Pending such a decision, no coercive action shall be taken by the Respondent No.1 against the Petitioner for the recovery of any claimed amount for the period in dispute.

In the event that on the final decision certain amount is found due against the petitioner, the same shall not be enforced for a period of one week from the communication of such demand to the petitioner.

Until the interim decision is taken by the Respondent no.1 On the Force Majeure claims, petitioner directed to deposit only the collected toll post the deduction of the retention amount, in toll plazas where there is below 90% pre-lockdown traffic.

In those toll plazas where there is greater than 90% of pre lockdown traffic, the deposit amounts shall be strictly in accordance with the Agreements.

2

HIGH COURT OF DELHI

Khoobsurat Infra Pvt Ltd. v. Idbi Trusteeship Services Ltd.

[MANU/DE/1340/2020]

Petitioner seeks for Order of Restrain on the Respondent No.1 from acting on the Pledge Invocation Notice against the Petitioner, including from invoking the pledge and / or selling the pledged shares in open market, during the pendency of the present Petition and / or conclusion of arbitration proceedings.

Petitioner seek for some time for the market conditions to recover to achieve optimal recovery for the debenture holders / petitioners, owing to the fact that COVID-19, being a Force Majeure event, has resulted in the stock markets not only operating at historically lower points but also are extremely volatile.

Petitioner also cites RBI and SEBI circulars granting relaxations for defaults during the Force Majeure situation and hence calls for financial institutions like the respondent No.1 and debenture holders owe a duty to act fairly and in good faith.

 

 

The Hon’ble Court held that when absolute discretion lies in law and under the subject contracts with pawnee to sell the shares when it likes and as it likes, surely, the Court cannot substitute that discretion with its own discretion.

Petitioner’s claims based on RBI and SEBI circulars are not appealing and the judgements relied on by the petitioners were distinguishable based on the facts.

Since, the terms of the contract have not been disputed by Petitioner, interpretation was not an issue.

Thus, when the regulator has not issued any circulars, to meet the eventuality of COVID-19, the Hon’ble Court cannot read into the contracts, to locate a clause akin to force majeure, for postponing the obligations under the contracts.

3

HIGH COURT OF DELHI

K L Enterprises Llp & Ors. vs Bajaj Finance Limited

[MANU/DE/1353/2020]

 

 

 

 

 

Petition filed under Section 9 of the Arbitration and Conciliation Act of 1996 seeking directions to restrain the Respondent and/or any person claiming through and/or under it, from selling/transferring/alienating and/or encumbering and/or creating any third party rights pertaining to the shares of Petitioner Nos. 1 to 5, pledged in favour of the Respondent as security for a loan taken by Petitioner No. 1.

Petitioner claims COVID-19 and subsequent lockdown as a Force Majeure situation and highlights the same as the reason for the drop in value of the mandated security.

Petitioner also cites that RBI had permitted lending institutions (LIs) to grant a moratorium of three months on payment of current dues falling between March 1 and May 31, 2020.

There being no Force Majeure Clause in the Agreements between the parties,the Petitioners cannot take a refuge under the same.

Assuming that the Agreement contained such a Clause, again they are not eligible for any relief as prima facie, it appears that the fall in the Security Margin started on 26.12.2019 and continued till 04.03.2020, though intermittently.

Thus, the past breaches cannot be condoned off in relation to COVID-19 as a Force Majeure event.

Petitioners shall furnish the Additional Securities, to the satisfaction of the Respondent, within a period of two weeks from the date of order.

The Restraint Order passed today will remain in force against the Respondent for a period of two weeks from today.

In case, Petitioners furnish the Additional Security acceptable to the Respondent, as directed above, the restraint order passed today will continue till the Arbitral Tribunal passes any other and/or further order.

In the event that the same has not been furnished, the restraint order will stand vacated upon the end of the two-week period granted to the petitioners.

4

HIGH COURT OF DELHI

Usha Goel v. Tata Power Delhi Distribution Ltd. and Anr.

[W.P.(C) 4107/2020 & CM APPL. 14714/2020]

 

Petitioner contends that because of the pandemic related lockdown, the petitioner was prevented from using the premises, therefore, the fixed charges cannot be levied.

The petitioner's contention is untenable because the respondent continues to discharge its responsibility of providing the essential service/electricity to the city despite the lockdown.

Also, the waiver has been sought merely on the non-usage of the premises and has not been sought on the basis of COVID-19 as a Force Majeure event.

5

HIGH COURT OF DELHI

Khoobsurat Infra Pvt. vs Idbi Trusteeship Services Ltd.

[MANU/DE/1379/2020]

 

 

 

 

 

Appeal has been filed under Section 37 of the Arbitration & Conciliation Act, read with Section 13 of the Commercial Courts Act, 2015 against the common judgment of the learned Single Judge, who had dismissed the petitions seeking interim relief by the Petitioner.

Petitioner claims that the learned Single judge had erred by not considering the extraordinary situation prevailing due to the pandemic, which constitutes a Force Majeure event and had failed to factor in the consequent difficulties of liquidity that companies were facing and which hardship the RBI had addressed by issuing moratorium for repayment of loans and also by releasing Rs.50,000 Crores of liquidity for utilization by mutual funds and issuance of guidelines by SEBI, precisely to protect the interest of investors.

After pointing out various other similar shortcomings, the respondent emphasized that what was sought was just a further time of six weeks, which would enable the appellants to make proper arrangements so that a more profitable deal could be struck or in the alternative, the appellants could make the assured payment of Rs.110 crores for which the Directors were willing to give an undertaking to this Court.

 

 

 

 

The Hon’ble Court held that the scope of interference by the court while exercising its jurisdiction in an appeal under Section 37 of the Arbitration and Conciliation Act was extremely limited.

Thus, it was held that despite the fact that the country was facing an extraordinary situation due to the Covid-19 pandemic and the economy has been impacted by the Force Majeure situation, the economic stress faced by the appellants cannot be a ground to discharge their legal liabilities founded on the contractual obligations agreed to by them and as incorporated in the DTD and the Share Pledge Agreements and the Corporate Guarantees.

Various other claims such as  the requirement of the License granted to the appellant/Direct Media for Direct to Home Broadcasting Services and the learned Judge’s non adherence to  the orders of the Bombay High Court as upheld by the Supreme Court to grant such interim protection, was also held invalid by the Hon’ble Court.

Thus, it was held that the Hon’ble Court cannot be a ground to restrain the respondent from exercising their rights as a pawnee as per their discretion, guaranteed under Section 176 of the Indian Contract Act of 1872.

6

HIGH COURT OF DELHI

Uni Construction v. Ircon International Limited

[O.M.P.(I)(COMM) 159/2020 & I.A. 4824/2020]

 

Petitioner seeks for an order/direction restraining the Respondent from invoking the bank guarantee and an order/direction restraining the Respondent from blocking the due payments of the Petitioner and awarding the balance contract to any other contractor.

Petitioner claims that he had invoked  Clause 71 of the GCC, which was the Force Majeure clause.

Despite COVID-19 being a Force Majeure event, Petitioner had unjustly, and in stark violation of the terms of the contract with the respondent, encashed the term deposit of ₹ 16,51,300/-, even before the work had been completed, and hence, the petitioner cannot seek an injunction, against the respondent, against encashment of the sole remaining term deposit receipt of ₹ 7 lakhs.

Relief under Section 9 of the Arbitration and Conciliation Act can be granted only if the considerations of a prima facie case, balance of convenience, and irreparable loss, are cumulatively made out.

 

7

HIGH COURT OF DELHI

Sh. Y.S Dwivedi v. Directorate Of Estate & Anr.

[MANU/DE/1375/2020]

 

 

 

 

 

 

Petitioner seeks the issuance of a writ of mandamus to the respondent nos.1 and 2, allowing him to retain the house allotted to him by the Government, on the prescribed license fee until the Covid-19 pandemic situation normalizes.

Petitioner claims COVID-19 to be a Force Majeure Situation and hence seeks for the said relief.

Prayer made on behalf of the Petitioner  to allow him to retain the allotted house on prescribed license fee till the situation of COVID-19 normalizes, cannot be granted, as it is not known when the situation of the present pandemic will end and no such prayer as made by the petitioner seeking retention of the allotted accommodation in which he has no right to reside, can be granted till eternity, despite the fact that COVID-19 is a Force Majeure event.

However, the Hon’ble Court granted a stay of the proceedings of the impugned order qua the petitioner till 31.07.2020, thus providing the petitioner with a reasonable period of time to evict the premises.

8

HIGH COURT OF KARNATAKA

Rajesh Export Limited vs Reserve Bank Of India and Anr.

[MANU/KA/2568/2020]

 

Petitioner, a public limited company seeks inter alia a Writ of Mandamus against Prime Corporate Branch of Canara Bank to defer payments in respect of Letters of Credit issued by the Bank at petitioner's request in the light of Force Majeure situation prevailing due to the Covid-19.

Respondent Number 2, Canara Bank has issued the L/Cs at Petitioner's request. Petitioner has received the gold and L/Cs have been discounted.

Therefore, Canara Bank is duty-bound to honour the L/Cs and make payment.

Further, Petitioner has not made out a case that it has a legal right over the performance of a legal duty by the Canara Bank against whom the mandamus is sought.

Hence, Petitioner is not entitled to a Writ of Mandamus even though COVID-19 might be construed as a Force Majeure event.

9

HIGH COURT OF KERALA AT ERNAKULAM

 

Golden Importers v. Union Of India

[MANU/KE/1888/2020]

 

 

 

 

 

 

Writ appeals against learned Single Judge’s order, seeking a writ of mandamus or any other appropriate writ, direction or order, commanding respondents 1 and 2 to ensure strict compliance with those Orders, recognising COVID-19 as a Force Majeure event and hence providing certain concessions and relief.

Furthermore, Petitioner seeks a Writ of mandamus or any other appropriate writ, order or direction, commanding the respondents to permit the petitioner to clear the imports covered by Exhibit- P1 series Bills of Lading by extending the benefit of Exhibit- P6 and to reimburse any amounts already paid thereto, courtesy of the fact that COVID-19 is a Force Majeure event.

Other interim reliefs also sought, including grant of injunction/restrain against the respondents under Section 151 of the CPC.

Those letters issued by the concerned Ministries,are indeed circulars/guidelines/advisories issued by respondent no. 1 and 2 and hence do not bind respondent no. 3 to 6 who are not availing any concession from port authorities and who have their containers located outside the Port Land.

Moreover, the letters/guidelines/advisories entailing COVID-19 as a Force Majeure event, also cannot intervene or interfere in a private contract which respondent no. 3 to 6 have entered with the petitioner.

Pertaining to the interim relief, the Court is bound to consider whether, (1) there is prima facie case, (2) balance of convenience, and (3) likelihood of irreparable hardship.

The petitioner has clearly failed to make a case out of the same and hence the Writ court has not committed any gross error in considering the interim order of the Hon'ble High Court of Delhi in Polytech Trade Foundation v. Union of India and Ors.and hence declining the interim reliefs sought for by the appellants.

 

10

HIGH COURT OF MADHYA PRADESH

Aman Jaiswal vs State Of M.P.

[WP Nos.7373, 7389, 7472, 7473, 7474, 7490, 7520, 7567, 7576, 7577, 7578, 7738, 7764, 7767, 7771, 7804, 7805, 7808, 7810, 7811, 7812, 7815, 7867, 7918, 8016, 8084, 8131, 8137, 8139, 8153, 8159, 8160, 8259, 8260, 8363, 8365 and 8575 of 2020]

Petitioners have challenged the auction process conducted by the respondents for grant of licence for the retail liquor shops  and further directions have been sought against the respondents to revalue the same; restrain them to issue licences to the petitioners; refund the money deposited by the petitioners and further to set aside the offers made by the petitioners and acceptance thereof by the respondents.

Few of the petitioners have also challenged those relevant clauses of the State Excise Policy 2020-21.

Petitioners have preferred the challenge on various claims including the claim that COVID-19, constituting a Force Majeure event, presented a need for relaxation.

The Hon’ble Court held that the petitioners had failed to show how the said memoranda, issued by the Central Government would apply to statutory contract under the Excise Act and its policy.

The Court also held that under office memorandum dated 13.05.2020, force majeure event is only for extension of contract period in view of the restrictions due to lockdown.

There was nothing to indicate that the parties can invoke force majeure clause for completely absolving themselves from performance of the contract.

It was further held that Clause 48 of the Excise policy expressly saves the compliance of the contract against the breach of the policy on account of ‘act of God’ and also against ‘natural calamities’.

Thus, the Hon’ble  Court held that it would not be out of place to hold that the Covid-19 pandemic falls within the meaning and term of "natural calamity" and hence, being a "force majeure" event expressly covered by Clause 48 of the Policy, which in the present case was impliedly within the contemplation of the parties and so its consequences.

Thus, the Hon’ble Court said that it did not find any force in the argument advanced on behalf of the petitioners that the force majeure event was neither within the contemplation of the parties and nor expressly or impliedly provided for in the Excise Policy.

In advancement of the same, it was held by the Court that  by virtue of Clause 48 of the Excise Policy 2020-21, the "force majeure" condition was expressly and impliedly within the contemplation of the parties and therefore, Section 56 of the Contract Act cannot be invoked, as in the present case, the petitioners have agreed to their obligations by submitting an affidavit that they would be bound by the terms and conditions of the Excise Policy 2020-21.

It was opined by the Hon’ble Court after relying on a Series of Supreme Court Judgements that it cannot be said that the contract between the parties had become totally unworkable, impossible, frustrated and unlawful to perform and hence petitioners cannot claim that they are excused from the performance of the contract.

Clause 48 of the Policy does not provide any benefit to the petitioners if decision to close the liquor vends or re-auctioning the liquor vends is taken on account of any liquor prohibition policy or any loss is caused to the licensees on account of act of God or natural calamity.

However, the Petitioners were given an option to invoke Clause 49 of the Excise Policy to seek remission/waiver of Excise duty to the extent of loss  if the petitioners find that they are at a loss in operating the allotted liquor shops.

The Hon’ble Court held that following all the due processes and procedures associated with the same, the Authority shall consider the claim of the petitioners sympathetically and take decision in accordance with law.

11

HIGH COURT OF GUJARAT AT AHMEDABAD

 

The Campaign Ads, Proprietorship Firm v. Rajkot Municipal Corporation

[C/SCA/8331/2020]

 

Petitioner seeks writ of mandamus or any other appropriate writ, order or direction, directing the respondent Corporation not to charge the amount of contractual pursuant to the contract entered into during the lockdown starting from 24.3.2020 till the lockdown period is removed and further be pleased to extend the contractual period equal to the lockdown period, owing to the fact that COVID-19 is essentially a Force Majeure event.

Petitioner relies upon the Office Memorandum issued by Government of India, Ministry of Finance dated 19.2.2020 and similar circular issued by the Eastern Central Railway.

Petitioner submits that the petitioner be permitted to file an appropriate application before the Corporation for the very purpose.

The Hon'ble High Court held that If any such application is filed, the Corporation shall look into the same and pass an appropriate order considering the circulars relied upon by the petitioner in this petition.

It was also clarified by the Hon'ble Court that the Court had  not expressed any opinion on merits and that the respondent Corporation shall take appropriate decisions in accordance with law.

12

HIGH COURT OF GUJARAT AT AHMEDABAD

 

Mantra Admedia Private Limited vs Rajkot Municipal Corporation

[C/SCA/8509/2020]

 

Petitioner seeks writ of mandamus or any other appropriate writ, order or direction, directing the respondent Corporation not to charge the amount of contractual pursuant to the contract entered into during the lockdown starting from 24.3.2020 till the lockdown period is removed and further be pleased to extend the contractual period equal to the lockdown period, owing to the fact that COVID-19 is essentially a Force Majeure event.

Petitioner relies upon the Office Memorandum issued by Government of India, Ministry of Finance dated 19.2.2020 and similar circular issued by the Eastern Central Railway.

Petitioner submits that the petitioner be permitted to file an appropriate application before the Corporation for the very purpose.

The Hon'ble High Court held that If any such application is filed, the Corporation shall look into the same and pass an appropriate order considering the circulars relied upon by the petitioner in this petition.

It was also clarified by the Hon'ble Court that the Court had  not expressed any opinion on merits and that the respondent Corporation shall take appropriate decisions in accordance with law.

13

HIGH COURT OF GUJARAT AT AHMEDABAD

 

Minaal Publicity, Proprietorship Firm v. Rajkot Municipal Corporation

[C/SCA/8717/2020]

 

Petitioner seeks writ of mandamus or any other appropriate writ, order or direction, directing the respondent Corporation not to charge the amount of contractual pursuant to the contract entered into during the lockdown starting from 24.3.2020 till the lockdown period is removed and further be pleased to extend the contractual period equal to the lockdown period, owing to the fact that COVID-19 is essentially a Force Majeure event.

Petitioner relies upon the Office Memorandum issued by Government of India, Ministry of Finance dated 19.2.2020 and similar circular issued by the Eastern Central Railway.

Petitioner submits that the petitioner be permitted to file an appropriate application before the Corporation for the very purpose.

The Hon'ble High Court held that If any such application is filed, the Corporation shall look into the same and pass an appropriate order considering the circulars relied upon by the petitioner in this petition.

It was also clarified by the Hon'ble Court that the Court had  not expressed any opinion on merits and that the respondent Corporation shall take appropriate decisions in accordance with law.

14

HIGH COURT OF GUJARAT AT AHMEDABAD

 

Bhavya Yogeshbhai Joshi v Rajkot Municipal Corporation

[C/SCA/8755/2020]

 

The petitioner has instituted this petition while invoking the "Force Majeure" clause agreed between the petitioner and the corporation, in the light of the nationwide lock- down which followed the spread of pandemic COVID-19.

According to the petitioner, the said situation prevented him performing the contract of advertising entered into by him with the corporation and therefore the corporation is obliged not to coercively recover the agreed amount/s under the contract from him.

The said petition under Article 226  of the Constitution of India would not be maintainable in absence of the petitioner making a written representation to the Corporation seeking advantage of the above-mentioned clause.

However, on the representation and request made by the petitioner, the Hon'ble Court directed that if the petitioner makes a representation on the subject matter of the petition, the same may be decided by the Corporation in accordance with law.

15

HIGH COURT OF GUJARAT AT AHMEDABAD

 

Global Publicity Proprietorship Firm v. Rajkot Municipal Corporation

[C/SCA/8951/2020]

 

Petitioner seeks writ of mandamus or any other appropriate writ, order or direction, directing the respondent Corporation not to charge the amount of contractual pursuant to the contract entered into during the lockdown starting from 24.3.2020 till the lockdown period is removed and further be pleased to extend the contractual period equal to the lockdown period, owing to the fact that COVID-19 is essentially a Force Majeure event.

Petitioner relies upon the Office Memorandum issued by Government of India, Ministry of Finance dated 19.2.2020 and similar circular issued by the Eastern Central Railway.

Petitioner submits that the petitioner be permitted to file an appropriate application before the Corporation for the very purpose.

The Hon'ble High Court held that If any such application is filed, the Corporation shall look into the same and pass an appropriate order considering the circulars relied upon by the petitioner in this petition.

It was also clarified by the Hon'ble Court that the Court had  not expressed any opinion on merits and that the respondent Corporation shall take appropriate decisions in accordance with law.

16

HIGH COURT OF DELHI

 

Beoworld Private Limited v. Bang & Olufsen Expansion

[MANU/DE/1453/2020]

 

Plaintiff claims that the grounds given in the Termination Notice issued by the Respondent for bringing the MDA to an end i.e. that the business was not being carried out or that the minimum stock level of its products as provided in Clause 7.14 of the MDA was not available or that there was a failure to fulfil the annual minimum purchase obligation as set out in Clause 9.1 of the MDA, were not made out.

Plaintiff also claims that COVID-19, being a Force Majeure event resulted in lockdowns and even following lockdowns, there is little or no foot fall in the malls and hence it was impossible to meet the minimum purchase obligation.

Plaintiff  had also failed to furnish an unconditional bank guarantee for an amount of Euro 1,137,430, as directed by the interim order of the Hon’ble Court.

Two applications filed before the Hon’ble Court by the plaintiff as well as the defendant under Rule 1 and 2 of the CPC and for vacation of the interim order, respectively.

 

The Hon’ble Court held that there was next to no chance in the plaintiff obtaining the relief of specific performance.

Therefore, it held that the interim protection shall not continue any further.

Furthermore, it was held that if the plaintiff was right in establishing as it contends that the termination was bad in law, it could seek recompense by way of damages.

Since the plaintiff claims that it has invested Euro 15 million in developing the Indian market for the defendant's brand, if relief of that kind is claimed and proved, it can be awarded by the Court of competent jurisdiction.

The interim relief order stands vacated as the Plaintiff had failed twice in furnishing the bank guarantee which it had offered to give not once but twice i.e. on 11.05.2020 and, thereafter, on 22.05.2020. -

The fact that the relationship between the parties has frayed to an extent that it can't be repaired was also considered despite the fact that COVID-19 as a Force Majeure event might have significant impact only in the near future.

 

 

 

 

 

 

 


Conclusion

 

The above-presented compilation of cases, inspected with a legal lens makes it evident that there is no particular trend practiced or observed by the Hon’ble High Courts in passing orders and judgements pertaining to cases involving “Force Majeure”. Assessing of issues based on the specific facts of the case and relief based on the same are the only discernable trends.

 

This being said, almost all the global nations are keen on resolving those existing issues. China has issued over 5,600 Force Majeure certificates to various companies[2], through its Council for the Promotion of International Trade thus entailing COVID-19 as an Act of God. However, in the Chinese case, bringing COVID-19 under Force Majeure might be to shift the blame game away from itself, with the world accusing China over COVID-19 and it being a potential weapon of mass destruction. In the Indian context, Sections 32 and 56 of the Indian Contract Act, 1872[3], through cautious interpretation, puts it out that mutual invoking of the clause is a possibility. In case of no such Force Majeure clause in the contract, Doctrine of Frustration comes in. Termination or holding of contracts where it is impossible to perform the contract due to an unforeseen event becomes possible through this doctrine. The centre too has responded by issuing an office memorandum through its Ministry of Finance, asking the relevant Government Departments to invoke Force Majeure clause wherever necessary[4]. However, it is evident that invoking Force Majeure does not amount to non-performance as the sole and first step and all possible alternatives like temporary hold on the performance, renegotiation between parties regarding the terms of contract are to be taken by the concerned parties. Further, invoking the clause has to be done only in case of a supply chain disruption or any event that makes the performance impossible and the event ought to be linked directly to COVID-19.

Thus, the issue is still afresh with COVID-19 continuing its onslaught all over the world, throwing up unprecedented challenges. It will be testing times indeed for the legal fraternity as we battle it out against our invisible enemy. While it is impossible to arrive at solutions to combat the same, certain actions like serving of timely notices and expressing the need to hold a contract and providing crucial evidence, linking the non-performance specifically to COVI9-19 can save the day and ease out the situation for both the parties.


 

 



[1] Fred Schmalz and Kellogg Insight, The coronavirus outbreak is disrupting supply chains around the world — here's how companies can adjust and prepare, BUSINESS INSIDER, (Mar. 26, 2020), https://www.businessinsider.com/covid-19-disrupting-global-supply-chains-how-companies-can-react-2020-3?IR=T

[2]China force majeure certificate issuance pass 5,600 amid virus outbreak - trade body, REUTERS, (Mar. 11, 2020) https://www.reuters.com/article/health-coronavirus-china-forcemajeure/china-force-majeure-certificate-issuance-pass-5600-amid-virus-outbreak-trade-body-idUSL4N2B43CK

[3] The Indian Contract Act, 1872 (Act no. 09 of 1872 dated 25th April 1872).

 

[4] Republic of India, Department of Expenditure, “Office Memorandum on Force Majeure Clause (FMC)”, (Ministry of Finance, 2020), available at: https://doe.gov.in/sites/default/files/Force%20Majeure%20Clause%20-FMC.pdf