Delhi High Court: “COVID outbreak can’t be used as an excuse for breach of contract”

Single Judge Bench of Justice Prathiba M Singh passed an order in the Delhi High Court. Earlier, Delhi High Court vacated an order restraining Vedanta Ltd from invoking eight bank guarantees extended by Halliburton Offshore Services in connection with a development contract for certain blocks in Rajasthan.

To elaborate, Vedanta floated a tender for integrated development of certain blocks in Rajasthan. Halliburton Offshore Services (Petitioner), and Vedanta (Respondent) entered into a contract. The terms of the contract stated various Performance, Liquidated Damages, and Advance bank guarantees provided by Halliburton.

However, the petitioner contended invocation of the force Majeure clause in the contract; as being unable to perform the contract due to the COVID-19 lockdown. The petitioner seeks direction to put a stay on the invocation of bank guarantees; furnished by it to the Respondent. Thereafter, in April, the High Court restrained the Respondent from invoking bank guarantees extended by the Petitioner. Notably, adding that the invocation of a bank guarantee could stay only on the grounds of fraud or special equities.

The Project delayed even prior to the outbreak of COVID-19 lockdown. Thus, the Court after analyzing the monthly reports of the Project, noticed that even before the Force Majeure invoked, the Petitioner did not comply with the deadlines for completion of the Project; and was in breach. Noting COVID-19 being a Force Majeure Event; the Court held that, “the outbreak of a pandemic cannot be used as an excuse for non-performance of a contract for which the deadlines were much before the outbreak itself“. Consequently, the ad-interim order was vacated and the petition was disposed of.