Southern Gas Ltd. v. Visveswaraya Iron & Steel Ltd.:

FORCE MAJEURE:

The expression force majeure is not merely a french version latin expression “vis maor”. It is undoubtedly a term of wider importance. Judges have agreed that strikes, breakdown of machinery, which though normally not include in vis major are included in force majeure. An analysis of ruling of subject shows that where reference is made to force majeure, the intention is to save the perform8ng party from the consequences of anything over which he has no control. The term force majeure relates to the law of  insurance and is frequently used in construction contracts to protect the parties in the event that a segment of the contract cannot be performed due to causes that are outside the control of the parties, such as natural disasters, that could not be evaded through the exercise of due care.

FORCE MAJEURE CLAUSE IN ARBITRATION ACT:

An agreement was entered into between the appellant and the respondent towards delivering, taking, using etc. of oxygen on certain terms and conditions. Clause 7 of the agreement is the “force majeure”. This clause provides that to the extent and during the period either of the parties is prevented from delivering or taking oxygen or using it in accordance with the agreement due to the operation of one or more of the force majeure events such as but not limited to the acts of God, war, revolution, floods, drought, earthquakes, strikes, lock-outs, conflagration, epidemics, riots, civil commotion, etc., they shall be relieved of their respective obligations of delivering or taking and paying for such oxygen. The claim of the respondent was that during a certain period, it was unable to take oxygen as per the agreement because there were more than 70 per cent power cuts due to which it could not run its LD Plant which in turn depended upon the Electric Pig Iron Furnace, which was highly power-oriented. On this premise, a dispute arose and an arbitrator was sought to be appointed. The appellant herein therefore moved the Court under Section 20 of the Indian Arbitration Act, 1940 successfully. An arbitrator was appointed. The respondent-Company took the matter in appeal before the High Court who reversed the judgment of the trial court to some extent pertaining to some items in dispute.

The orders of the High Court have been challenged herein on the ground that whether or not it was a case of “force majeure”, was a preliminary question determinable by the arbitrator. In other words, if the respondent could successfully plead and prove to the satisfaction of the arbitrator that “force majeure” clause was attracted, it would preclude other disputes being raised before and determined by the arbitrator. In any event, the matter initially had to go to the arbitrator to be stopped or continued after the decision on the question of “force majeure”. We think that the appellant is on sound ground in contending this way towards interpretation of the agreement contained in clause (7) above-referred to read with clause (22) providing for arbitration. Even learned counsel for the respondent appreciated the logic of the argument and has in the manner submitted to it before us. Let the arbitrator, therefore, first go into the question whether the dispute falls within the ambit of the arbitration agreement dependent on the determination whether the breach could invoke the “force majeure” clause or not, and if not then to proceed further within his domain to determine all questions as raised by the parties.

For the foregoing reasons, we allow this appeal, set aside the impugned judgment and order of the High Court putting the matter back on the file of the trial court to suitably modify the reference to the arbitrator in the light of the decision aforemade. Order was given accordingly, without any costs.