The imposition of the lockdown by the Hon’ble Prime Minister to curb the increasing number of Corona virus cases has been seen as a consequence arising out of the enactment of the Disaster Management Act. Apart from affecting the Indian economy critically, the pandemic has also influenced the Indian legal system in a great manner.

FACTS:

In the given case, the petitioners and the respondents entered into a contract, wherein the petitioners were required to construct certain blocks for integrated development, in certain parts of Rajasthan. In light of the same, the petitioner issued certain guarantees through ICICI bank towards the respondents, with the purpose of issuing them in case there is a breach of contract by them. 

Halliburton Offshore was required to complete the project by 31st of March, 2020 but due the lockdown imposed by the government in light of the global COVID-19 pandemic, the same could not be done. As a result, the respondents invoked the guarantees in order to compensate for the losses incurred.

The petitioners sought the force maejure clause, which considers COVID-19 as an Act of God, that could not be foreseen and therefore prayed seeking an injunction against the respondents to stop them from invoking the bank guarantees.

ARGUMENTS:

The petitioners argued that the construction work was very well on its way to completion much prior to the completion date. However, with the rise in the corona virus cases in India, the government imposed a lockdown which led to a restriction in the movement of the workers who were needed for the completion of the work. 

The respondents argued that the only way in which the bank guarantees could be stayed would be through the way of egregious fraud, which was not present in the given case. Moreover, they also stated that the petitioners continuously asked for extension, for the completion of the project, however, due to non-completion of the contractual promise, they used the force majeure clause as a way to escape out of the contractual liabilities. 

DECISION:

The case, which was decided by a single judge bench, stated that prima facie the clause of egregious fraud could not be acceptable here, since there was no case of the same. Moreover, the court also opined that the nation wide lockdown does come under the category of force majeure since there has been no such imposition made within the country ever before, and therefore could not be considered as a foreseeable event. A lockdown like this, according to the court is considered as unprecedented. 

The court thus gave a decision in favour of the petitioners, and ordered the respondents, i.e. Vedanta & Anr., to not invoke the guarantees till the next date of hearing.