Rajasthan High Court: In a writ petition preferred by the petitioners challenging the recovery notice issued by Gram Panchayat, Pasund demanding a payment of Rs.19,26,680/-, in the of petitioners’ inability to perform contractual obligations due to the COVID-19 pandemic, a single-judge bench comprising of Vinit Kumar Mathur., J., while acknowledging the impact of unforeseen circumstances on contractual obligations, partly allowed the writ petition, quashed the recovery order for the period affected by the pandemic, and instructed the Gram Panchayat to recalculate the amount accordingly.
Factual Matrix
In the instant matter, the petitioners entered into an agreement with Gram Panchayat, Pasund, on 30-01-2019, for removal and dumping of marble slurry with a stipulated monthly payment by the petitioners. Due to the outbreak of COVID-19 pandemic, the petitioner faced difficulties in fulfilling their contractual obligations, particularly from March 2020 to June 2021, during which industrial operations were halted due to lockdown measures. Consequently, the Gram Panchayat, Pasund issued a recovery notice of Rs.19,26,680/- against the petitioners. Aggrieved by the issuance of impugned recovery notice, the petitioners preferred the preset petition challenging the same.
The petitioners contended that the pandemic situation caused lockdowns, halting industrial activities, which prevented the petitioners from fulfilling their contractual obligations. The petitioners asserted that they fall under the category of “Force Majeure” due to circumstances beyond their control. It was argued for the benefit of waiver, similar to that granted by the State Government to other contractors affected by the pandemic. It was further contended that paying the demanded amount would cause financial hardship to the petitioners’ families. However, the respondents contended that the petitioners are obligated to fulfill their contractual obligations regardless of external circumstances. It was asserted that the agreement does not include provisions for relaxing payment obligations in cases of unforeseen events and there is no provision in the agreement allowing waiver of payments due to external factors. It was further contended that the State Government’s actions regarding other contracts do not apply to the petitioners’ situation.
Moot Point
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Whether the petitioner is liable to pay the amount ordered by the Gram Panchayat, Pasund?
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Whether the outbreak of COVID-19 pandemic constitutes force majeure, relieving the petitioner from contractual obligations?
Court’s Reasoning
The Court found that the petitioners were prevented from fulfilling their obligations due to circumstances beyond their control. The Court acknowledged the agreement between the parties and the petitioners’ inability to fulfil contractual obligations due to the COVID-19 pandemic. The Court invoked the doctrine of “Force Majeure” and stated that if one party is unable to perform due to unforeseen circumstances, they cannot be held liable. While citing Satyabrata Ghose v. Mugneeram Bangur & Co., (1953) 2 SCC 437, the Court held that the petitioners’ situation falls under Section 56 of the Contract Act, 1872. Referring to the doctrine of frustration under Section 56 of the Contract Act, the Court held that the petitioner’s inability to perform was beyond their control and qualifies for waiver of contractual obligations. The Court also noted that the respondent admitted to the suspension of work for 10 months, aligning with the petitioner’s argument.
“…if the situations beyond human control happen during the currency of a contract and the same have not been taken note of or written in the contract/agreement, they are required to be considered while settling the dispute between the parties for balancing the equity and arriving at a just and proper decision.”
Court’s Decision
The Court partially allowed the writ petition and quashed the recovery order for the period from March 2020 to June 2021. The Court instructed the Gram Panchayat, Pasund to recalculate the amount, waiving the recovery for the aforementioned period and directed the petitioner to deposit the recalculated amount in installments determined by the Gram Panchayat, Pasund.
[Manoj Paliwal v. State of Rajasthan, 2024 SCC OnLine Raj 914, order dated 15-04-2024]
Advocates who appeared in this case :
Mr. Sandeep Saruparia, Counsel for the Petitioners
Mr. Falgun Buch, Counsel for the Respondent 3 and 4
