Judgment:
Forum: Hon'ble
Judgment delivered on:
Act/Law: Arbitration and Conciliation Act, 1996 ("Act").
Ratio: Distribution of steel is an "essential service" during the lockdown period; a force majeure clause, contained in the contract, specifically providing for termination at the hand of one party, cannot be invoked by the other party and cannot be enforced against any third party to the said contract.
Background: Petitions were filed under Section 9 of the Act by Petitioners (
Analysis: The question before the Court for adjudication was whether the force majeure clause contained in the contracts can be invoked the present situation of COVID-19 against a third party, i.e. the Respondent No. 3 bank (not being a party to the contracts inter se Petitioners and Respondent No. 1) and that whether the force majeure clause be invoked by the Petitioners in view of the fact that the Respondent No. 1 had already complied with their part of the contracts and had shipped steel (goods under the contracts whose movement have not been restricted by the Indian authorities during lockdown) from
The Court, holding that the Petitioners are not entitled to any ad interim reliefs against the
- The Letters of Credit are an independent transaction with the
Respondent Bank and theRespondent Bank is not concerned with underlying disputes between the Petitioners (buyers) and the Respondent No. 1 (seller); - The force majeure clause contained in the contract, by its language, is only applicable upon the Respondent No. 1 and not the Petitioners and that the Petitioners cannot use lockdown as an excuse to resile from its contractual obligations of making payments to the Respondent No. 1;
- The fact that the Petitioners would not be able to perform its obligations so far as its own purchasers are concerned and/or it would suffer damages, is not a factor which can be considered and held against the Respondent No. 1, who had complied with their part of the contracts;
-
Notifications/advisories relied upon by the Respondent No. 1 stating that there is no restriction upon movement of steel on all ports and port related activities including the movement of vehicles and manpower, operations of container freight station, warehouses and offices of custom houses agents have also been declared as essential services and the Notification of Director General of Shipping,
Mumbai declaring that there would be no container detention charges on import and export shipments during the lockdown period - leads to the inevitable conclusion that distribution of steel has been declared as an essential service. -
The judgments of Energy Watchdog Vs. CERC (2017) 14 SCC 80 and Satyabrata Ghose Vs.
Mugneeram Bangure & Co. (1954) SCR 310 as relied by the Petitioners are inapplicable to the present matter.
Conclusion: In our view the Court has rightly refused to grant benefit of force majeure to the Petitioners and rejected the grant of ad interim relief to the Petitioners against the
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