The Bombay High Court has refused to grant ‘Force Majeure’ exemption to a set of steel importers. They had approached the Court under Section 9 of the Arbitration and Conciliation Act seeking directions to restrain Wells Fargo, the respondent bank, from encashing the Letters of Credit. The petitioners stated that the lockdown had rendered the performance of the contract impossible.
Placing reliance upon section 56 of the Indian Contract Act, 1972, they argued that their contracts with the respondents- Hyundai Corp and GS Global- were unenforceable on account of “frustration, impossibility and impracticability.” The petitioners referred to the Supreme Court’s decision in Energy Watchdog v. CERC (2017) and Satyabrata Ghose v. Mugneeram Bangure & Co. (1954). After hearing the arguments on both the sides, the Court made the following observations:
- Letters of Credit are an independent transaction with the Bank. It is not concerned with underlying disputes between buyers and sellers.
- Only the exporters can invoke the ‘Force Majeure’ clause in the concerning contracts.
- Distribution of steel is declared as an essential service. Furthermore, all ports and port-related activities are also declared as essential services. The Director-General of Shipping, Mumbai has also issued a notification stating that there would be no container detention charges on shipments during the lockdown.
- The judicial precedents relied upon by petitioners are distinguishable on facts.
- In any event, the lockdown would be for a limited period and cannot come to the rescue of the petitioners as far as the contractual obligations as to payments are concerned.
In light of the aforementioned observations, the Court rejected all ad-interim reliefs sought by the petitioners. Advocate SB Deshmukh and Uttam Rane appeared for the petitioners. While Senior Advocate Vineet Naik appeared for GS Global, Ameya Gokhale, Veena Sivaramakrishnan and Vaibhav Singh appeared for Hyundai Corp.