Delhi High Court
Case BriefsHigh Courts


Delhi High Court: In a case where the Trial Court directed the tenants ‘appellants herein' to pay the defaults in rent, which was due in COVID, the Division Bench of Saurabh Banerjee, and Suresh Kumar Kait, JJ. upheld the same as the tenants willingly chose to retain the possession of the premises and as there was no clause in the Lease Deed giving any suspension, thus, the appellant was bound to pay the monthly charges to the landlord in terms of the clear stipulations contained in the Lease Deed.


The respondent-landlord had given the said premises on lease to the appellant-tenants to carry out authorized commercial activity like running a spa or any other activity vide a registered Lease Deed dated 18-12-2010 (‘Lease Deed') for a period of 15 years, commencing from 15-05-2010 to 14-05-2025. During the subsistence of the aforesaid Lease Deed, COVID-19 pandemic spread across India and the lockdown prevailed from March, 2020 for the ensuing months, thus resulting in non-payment of rent.

The respondent issued legal notice(s) on 20-04-2020, 11-05-2020 and 28-05-2020 for payment of rent, even offering suspension of payment for 60 days on compassionate grounds which went unanswered. The tenants, however, continued to stay on the premises till termination of the Lease Deed which was was thereby terminated vide notice 07-06-2020. A reply was sent to the landlord denying the liability by taking plea of force majeure as per Clause 14 of the Deed.


An application under Order XIII A Civil Procedure Code, 1908 (‘CPC') r/w Section 151, CPC read with Section 3 Commercial Courts Act, 2015 ‘Order XIII A application' was filed by the landlord which was decreed in favour of them. Being aggrieved, the appellant challenged the impugned judgement on three basic grounds.

1. The Trial court had overlooked the fact that the premises was ‘unfit to use' alleging thereby that because of the then prevailing lockdown situation during the period in dispute and passing of different circular(s) issued by various Government(s) from time to time the appellant was unable to carry on the activity of running a Spa from the said premises.

2. The Trial Court had wrongly applied the provision of Section 108(e) of the Transfer of Property Act, 1882 even though the parties were admittedly bound by the terms of the Lease Deed executed inter-se and that the Transfer of Property Act, 1882 was not applicable to the facts and circumstances of the case.

3. As there was no commercial use of the premises permissible and/ or possible during the aforesaid period in the dispute before the learned trial court, the respondent was not entitled to rent for the said period.

What is Order XIII A CPC?

The Court noted that the said provision of Order XIII A was introduced in the CPC by way of an amendment in the year 2015 with respect to all kinds of commercial disputes only. The said Order XIII A, CPC is a provision enabling the courts to take up and decide claim(s) in the commercial disputes without recording oral evidence, i.e., without following the ordinary procedure to be adopted and followed in an ordinary suit. Two fundamental grounds which have to be satisfied while deciding an Order XIII A application are that a party has to show that the other party has no real prospect of succeeding in and/ or defending the claim and that there is no other compelling reason as to why the claim should not be disposed of before commencement of trial, i.e., recording of oral evidence.

Observation and Analysis

The Court noted that on a careful analysis, it emerges that the provision of Order XIII A, CPC has been specifically introduced by the Legislature so as to adjudicate and decide the issue(s) at the threshold itself without proceeding to the unnecessary rigors of a prolongated trial and to save time, effort and money by making it more convenient and expeditious for all concerned, be it the court(s) and/ or the parties involved. Furthermore, an Order XIII A application can be allowed, and a court can proceed to pass a summary judgment if a party has a real prospect of succeeding and/ or defending in the claim and there is no real purpose of proceeding to trial, i.e., recording oral evidence.

The Court further noted that the appellant is merely trying to reagitate the same issues in the form of grounds which have all been heard, taken note of and decided by the Trial Court in the impugned judgment, by simply giving a different flavour to them.

The Court observed that there clearly exists a relationship of respondent-landlord and the appellant-tenant and they are bound by terms of Lease Deed. Since the appellant neither chose to exercise his right to terminate the Deed nor chose to vacate the said premises until termination, thus, there is no such clause in the Deed to claim non-payment of rent. Thus, the appellant was well and truly liable to pay the lease rentals as per the Lease Deed along with interest thereon for the period in issue.

On the issue of the premises being unfit for use due to COVID and the then prevailing lockdown, the Court opined that the premises were always fit to use, and the appellant was free to carry on any kind of commercial activity barring running a Spa. The Court premised this on a well settled law that temporary non-use of premises during the lock down period cannot be construed as rendering either the stipulated term of the Lease Deed void or giving any benefit to the tenant to claim suspension of rent on the ground of mere non-use thereof.


The Court remarking that Section 108(e) of The Transfer of Property Act, 1882 is inapplicable to the facts of the instant case, held, as the appellant willingly chose to retain the possession of the premises and as there was no clause giving any respite to it, the appellant was bound to pay the monthly charges to the respondent in terms of the clear stipulations contained in the Lease Deed.

[Siddhatha Singh v. Ajit Singh Bawa, 2022 SCC OnLine Del 2007, decided on 12-07-2022]

Advocates who appeared in this case :

Mr. Harsh Gokhale, Advocate, for the Appellant.

*Arunima Bose, Editorial Assistant has reported this brief.

National Consumer Disputes Redressal Commission
Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): Expressing that the builder cannot take shelter of “Force Majeure” while delay in handing over possession Coram of C. Viswanath (Presiding Member) and Ram Surat Ram Maurya (Member) directed for a refund of buyers’ amount along with interest.

Facts in a Nutshell

Complainants had booked a unit in OP’s project and paid a booking amount as well. Later they were allotted a unit vide an allotment letter.

Subsequently, an Apartment Buyer’s Agreement was executed, wherein possession of the unit was promised within 39 months from the date of excavation, excluding an additional grace period of 6 months to complete the project.


The grievance of the Complainants was that the OP, despite receiving more than 90% of the total consideration, failed to hand over possession of the Unit, within the promised time period and even possession in the near future seemed unlikely.

Contentions of the OP

OP while contending that the possession could not be delivered in time because some of the customers did not make timely payments also added that there was a shortage of labour due to construction of Commonwealth Games Village, shortage of water, dispute with construction agencies, delays in obtaining licenses, approvals, etc. Further, it was added that as per the Agreement, in case of delay caused due to “Force Majeure” events, the OP would be entitled to an extension of time, without incurring any liability.

Though, the Opposite Party failed to prove that there was an unforeseen and unexpected event that prevented the completion of the Project within the stipulated time period.

Analysis, Law and Decision

Commission expressed that the OP cannot take shelter of the “Force Majeure” Clause and the reasons cited by the OP for the delay of the project, appeared to be delaying tactics veiled as “Force Majeure” conditions and seemed to be an attempt to wriggle out of its contractual obligations.

It was noted that even after receiving the substantial amount OP failed to fulfil its contractual obligation of delivering possession of the Unit to the complainant within the time stipulated.


A person cannot be made to wait indefinitely for the possession of the flats allotted to him/her. The Complainants are, therefore, entitled to seek the refund of the amount paid along with compensation. [Manoj Kawatra v. Pioneer Urban Land & Infrastructure, 2021 SCC OnLine NCDRC 325, decided on 1-11-2021]

Advocates before the Commission:

For the Complainant: Aditya Parolia, Advocate

For the OP: T.V.S. Raghavendra Sreyas, Advocate



These days the impacts of Covid-19 have reverberated around worldwide, putting enormous strain on public health providers and enterprises of all sorts. While adopting a method to control and regulate Covid-19 is critical, individuals and organisations must also be aware of their contractual rights and obligations during this period. To better understand the impact of Covid-19 on international commercial contracts, as well as the remedies and exceptions available to company owners under such contracts, it is essential to undertake a study of the various concepts involved under the realm of these contracts, which is the aim of the article.

An insight into the principle of force majeure and the doctrine of frustration in light of the ongoing Covid-19 pandemic

A significant question here is whether the Covid-19 pandemic has rendered contractual duties impossible to fulfil, or whether the incapacity of a participant to fulfil contractual commitments is attributable to past choices or acts taken in consideration of the situation at present. To determine this, two concepts are of utmost importance. They are:

i. The Principle of Force Majeure; and

ii. The Doctrine of Frustration.

The Principle of Force Majeure: It is always feasible that severe and inevitable circumstances outside the control of the transacting parties will make business transactions unattainable. “Force majeure” occurrences are characterised by their extreme nature and unpredictability. The phrase “force majeure” comes from civil law in France and implies “superior force”. The concept of force majeure, on the other hand, does not exist under common law or English Law. War or acts of terrorism, lockouts, riots, energy supply shortages, as well as other catastrophes usually referred to as “acts of God”1 that no one can be held responsible for are examples of situations that fall under the umbrella of “force majeure” (i.e. natural disasters). Force majeure provisions can be negotiated to incorporate a checklist of particular circumstances that will activate the provision, or they can be designed generally and leave it up to the stakeholders to establish or accept that a “force majeure” event has occurred. While each contract’s phrasing for force majeure clauses is different, they usually include the following characteristics:

  1. text exempting one or both sides from completing the contract if a force majeure event happens;
  2. a list of force majeure events that are normally negotiated by the participants;
  3. impacted party requirements (i.e. notice and mitigation obligations); and
  4. prescribed remedies.

A force majeure clause, irrespective of its particular details, normally only applies to unanticipated situations and beyond reasonable human forethought and expertise. Company owners must be aware that for the Covid-19 pandemic to activate the application of a force majeure clause, the affected party must demonstrate that the pandemic was:

  1. unexpected; and
  2. rendered the fulfilment of its contractual obligations impracticable.

The impacted party must demonstrate that fulfilment of its duties has been hampered or postponed as a direct result of the pandemic in order to establish this causal relationship. It is indeed crucial to remember that when attempting to depend on or exercise a force majeure clause, the impacted party is usually required to minimise the impacts of the force majeure occurrence. Commercial reasonableness is the criteria for mitigation under a force majeure situation.

The goal of force majeure provisions in commercial contracts is to release participants from liability in the case of an unanticipated and inevitable event. Rather, it is up to the contracting parties to determine what constitutes force majeure and what the implications will be if a force majeure event occurs. In principle, force majeure provisions absolve parties to a contract of their contractual responsibilities in the case of an occurrence beyond the parties’ control.

Before utilising a force majeure provision, a party seeking remedy must meet specific requirements. First and foremost, the impacted party must adhere to any contractual procedural obligations. These obligations involve notifying the other party that the force majeure occurrence is interfering with the fulfilment of its contractual obligations. This notice must be sent within the time range specified. The necessity of giving notice is normally a condition precedent that must be met by the party requesting relief under this provision.

As a result, in order for a force majeure provision to apply (should a force majeure incident happen), the emergence of such events must be beyond the stakeholders’ power, and the stakeholders must demonstrate that they have made reasonable efforts to reduce the impact of the force majeure event. If an incident or circumstance falls within the scope of a force majeure event and meets the clause’s criteria for applicability, the stakeholders will be excused from executing their respective responsibilities under the contract for the duration of the force majeure event.

Additionally, according to the language of the provision, the parties may be obliged to provide a written notice informing the other party of the occurrence of such event and invocation of the force majeure clause. Some contracts additionally state that if a force majeure incident lasts for an extended period of time, the parties may be able to terminate the contract.

Lastly, the party claiming the force majeure provision must show that the force majeure incident prohibited, hampered, or postponed the performance of its contractual obligations. As a consequence of the force majeure incident, the party must demonstrate that it was legally or practically impossible to execute its commitments. The party must additionally show that it was unable to fulfil its responsibilities due to circumstances or events beyond its control and they did everything in its power to mitigate the effects of such a situation. There can be additional remedies granted to the affected party, but these additional remedies can be determined by the courts and tribunals or by negotiations with the defaulting party. Further, if a party receives a force majeure notice from the other party, then adequate measures have to be followed by the receiving party as elucidated below.

A force majeure notice and the way to handle it

The first step is to locate the appropriate contract. The notice will have been served in accordance with the contract’s force majeure clause. The second step is to interpret the clause. Force majeure provisions can take many different shapes. Its design will be determined by the contract and the nature of the business.

Here, some preconditions apply, such as whether there are any restrictions on the exercise of the provision, such as whether the supplier must serve the notice within a certain time-frame or in a specific format. If this has not been observed, the precondition may be classified as a condition precedent that must be met in order to activate the clause, or as an intermediate term whose non-fulfilment does not prevent the supplier from invoking the clause, based on the architecture of the clause. The receiving party must be cautious not to waive such requirements or act in such a way that estoppel is created.

Lastly, it should be determined whether the stated force majeure occurrence and the other party’s non-performance are related. Examine whether performance can be excused under another legal doctrine, such as the frustration of contract or impossibility of performance if there is not a force majeure provision. Insist on receiving the following:

a) proof of the factors purportedly delaying performance, and

b) regular updates on its attempts to resume performance and/or lessen the impact of the delay. Consider drafting a written contract revision to reflect a commercially sensible outcome if necessary.

Additionally, a party seeking relief under the force majeure clause has the obligation to establish the burden of proof to demonstrate that the force majeure incident has impacted such party’s performance of the contract.

Furthermore, the force majeure certificate plays an essential role under force majeure conditions. Although the “force majeure certificate” is the primary evidence that the company has been engaged in Covid-19 harmful impact, it is insufficient to release the company from its contractual responsibilities. It has also been established that contractual performance has become objectively implementable as a consequence of the pandemic or the authorities’ restrictions. In other words, the debtor must show that the pandemic is an “objective, unforeseen, inescapable, and insurmountable occurrence” that directly affects contractual performance in its specific circumstances.

The Doctrine of Frustration: When it comes to negotiating the parameters of a commercial transaction, stakeholders sometimes get caught up in the big image and overlook what could be considered as boilerplate clauses. As a consequence, a contract may be quiet on how to behave in the event of unforeseen and extreme circumstances. The present practice of the courts is not to read in a force majeure clause into a contract, whether the transacting parties intentionally opted not to add one or just neglected to do so. A party who is unable to perform contractual duties owing to a force majeure event must claim that the contract has been frustrated due to certain conditions. A party proposing that the theory of frustration of contract should apply, unlike invoking a force majeure provision, is not asserting that fulfilment of its contractual duties is impossible. Instead, this is a higher-level assertion that the impacted party’s motivation for engaging in the contract has vanished.

According to case law,2 an entity asserting frustration of contract must show that:

  1. the impacted party can no longer achieve its intent for the transaction;
  2. all parties to the contract were aware of the impacted party’s primary purpose for entering into the contract; and
  3. the frustration was caused by a qualifying supervening event.

When an employee’s place of employment is harmed and the reason for the employee’s hiring is no longer valid, the frustration of contract is widely utilised in employee-employer contracts. Another instance is when a property is sold for a certain use and a municipality passes a zoning by-law limiting that purpose after the contract is signed. Furthermore, the impacted party must consider whether the Covid-19 epidemic counts as an intervening event that has fundamentally altered the contract from what was originally agreed to. Despite the fact that this path is complicated, demanding and pricey, it may be the only viable alternative in the event of a crisis. While the aforementioned fundamentals may provide helpful reference to how force majeure clauses or the doctrine of frustration may apply to contractual obligations impacted by the Covid-19 pandemic, company owners should pay close attention to the specific info of their contracts and seek legal advice if such claims are made.

After taking a look at the force majeure principle and the doctrine of frustration, it is essential to understand the relevance of the notion of “hardship” in a contractual equilibrium, to completely understand the nitty-gritty associated with international commercial contracts.

Interpretation of the term “hardship” and its legal consequences

First and foremost, it should be noted that the Principles relating to International Commercial Contracts 2004, which includes provisions on hardship are issued by the International Institute for the Unification of Private Law (UNIDROIT). “Where the performance of a contract becomes more burdensome for one of the stakeholders, that party is nevertheless required to perform its obligations subject to the following restrictions on hardship,” according to Article 6.2.1 of the aforementioned principles.

The “following provisions” mentioned in Article 6.2.1 are provided in Article 6.2.2, which states that “hardship exists when the onset of incidents fundamentally modifies the equilibrium of the contract, either because the cost of a party’s performance has increased or because the value of the performance a party receives has diminished, and

a. the events occur or become known to the disadvantaged party after the conclusion of the contract;

b. the events could not reasonably have been taken into account by the disadvantaged party at the time of the conclusion of the contract;

c. the events are beyond the control of the disadvantaged party; and

d. the risk of the events was not assumed by the disadvantaged party.”

The consequences of hardship are outlined in Article 6.2.3, which states:

i. In the event of hardship, the affected party has the right to request renegotiations. The request must be made as soon as possible and must state the grounds for the request.

ii. A request for renegotiation does not give the disadvantaged party the right to refuse to perform.

iii. If the parties are unable to reach an agreement within a reasonable time, either party may take the matter to court.

iv. If the court finds hardship, it may

a) terminate the contract at a predetermined date and on predetermined terms, or

b) adapt the contract to restore its equilibrium.

Furthermore, hardship refers to situations in which the agreed-upon performance is still technically attainable. Nevertheless, some underlying facts have significantly changed, making proper fulfilment of contractual obligations possible in principle but not economically viable.

Hardship is founded on the premise that the contract’s underlying circumstances alter in a manner that the parties did not anticipate at the time of the contract’s conclusion, and while the contractual obligations are still fulfillable in principle, it does not make economic sense. For instance, suppose the seller of a specific object loses it in the ocean. In theory, he should try to recover it from the ocean’s depths, which is theoretically possible but not economically feasible.

In the event of adversity, contract performance is not impossible, but it is hampered. Hardship is described as any legal, technical, political, or financial incident that occurs after the contract’s completion that was unforeseeable at the time the contract was formed, regardless of the best efforts.  In principle, hardship does not render performance impossible, but it does permit contract renegotiation. A hardship provision can compel the parties to negotiate new contractual conditions if ongoing performance has become unreasonably onerous owing to an occurrence beyond a party’s reasonable control. It is the goal of a hardship clause to give the parties more freedom while also balancing the risk.

As far as the legal consequences of the hardship clause are concerned, it should be noted that the hardship provisions recognise that parties must fulfil their contractual obligations even if events make fulfilment more difficult than could have been reasonably anticipated at the point of the contract’s conclusion. The legal consequence of hardship is that the participant whose underlying circumstances have changed significantly can still perform the contract and fulfil its contractual responsibilities, but the performance has lost its economic value.

Further, hardship is founded on the core concept of civil law and international law, namely, pacta sunt servanda, which indicates “agreements must be fulfilled”. Private contract provisions are law between the parties, and non-performance of certain clauses represents a breach of the pact, according to this theory. Nonetheless, there is one caveat to this genuine pacta sunt servanda idea. The restriction is known legally as clausula rebus sic stantibus, which is a legal doctrine that allows contract terms to become unenforceable due to a substantial shift in conditions. It is effectively the “escape clause” that provides an exception to pacta sunt servanda’s general norm. Even so, it is evident from a review of the UNIDROIT principle that a contract’s clauses can be subjected to the “escape clause of hardship” only when:

  1. events occur or become known to a party after the contract’s conclusion;
  2. the events could not reasonably have been taken into account at the time of the contract’s conclusion;
  3. the events are beyond the party’s control; and
  4. the risk of the events was not assumed by it.

This philosophy can be applied to any contract, including domestic and international business agreements. Since the concepts of pacta sunt servanda and clausula rebus sic stantibus are essential principle of international as well as domestic laws, it is essential to study them in-depth.

Understanding the doctrine of clausula rebus sic stantibus

The doctrine of clausula rebus sic stantibus (Latin: “things standing thus”) states that a participant may withdraw from or cancel a treaty if there has been a significant change of circumstances.3 Also, the Latin phrase “clausula rebus sic stantibus” (things thus standing) refers to a scenario in which a contract cannot be retracted or terminated as long as the contract’s circumstances have not changed significantly.

Clausula rebus sic stantibus is a provision in international agreements (international treaties or accords) that allows a treaty to be rendered unenforceable owing to radically altered circumstances. One of the first standards of customary international law is this doctrine. Article 62 of the Vienna Convention on the Law of Treaties codifies a form of this idea. Individual treaties frequently include it as a clause4. This has frequently been employed as a theory in international law, particularly treaty law, and has been the topic of debate and disagreement.

Additionally, clausula rebus sic stantibus is a notion that permits the withdrawal or termination of an agreement or treaty when the parameters of the contract or treaty alter fundamentally. It serves to get around the principle of pacta sunt servanda, which asserts that all States must uphold agreements made in good faith between them. Pacta sunt servanda is also legally provided for in Article 26 of the Vienna Convention which provides that treaties in force are binding upon parties and are to be performed in good faith.5

Article 62 of the Vienna Convention on the Law of Treaties (1969) discusses the fundamental change of conditions in which clausula rebus sic stantibus can be asserted, but it is subject to the following conditions:

  1. There must be a fundamental change in the circumstances that existed at the time the treaty was signed to the current circumstances. The parties could not have predicted such a radical shift.
  2. Those circumstances must have been a necessary condition for the parties’ assent to enter the treaty and agree to be bound by it.
  3. The modification has the impact of significantly and drastically altering the scope of a party’s duties under the treaty.
  4. If no boundary is established by the treaty.
  5. This theory cannot be utilised to avoid treaty obligations if the fundamental change occurs as a result of a breach by the party invoking the change. This breach could be a violation of a treaty obligation or a violation of any international commitment owed to any party under that treaty.

Parties withdrawing from treaties have frequently invoked this doctrine in international relations. This notion can be used by a State in the following situations:

a) At the time of the treaty’s conclusion, the State believes the treaty’s provisions are favourable but later discovers that they are not. There could be an internal scenario in a country where the treaty is judged to be destructive or detrimental. In such cases, the State may consider withdrawing, terminating, suspending activities, or declaring the pact null and void.

b) State sovereignty and strategy may demand that the community does not always adhere to the conditions of the treaty, prompting the community to withdraw from the agreement. This option is available if a State believes a treaty is harmful to its security or the security of its subjects.6

As a result, it has been observed that States frequently apply this theory for internal purposes such as the defence of their objectives. Through the condition of “substantial change in circumstances”, this concept fulfils the goal of protecting State interests while also avoiding misuse.

Lastly, a party desiring relief under clausula rebus sic stantibus must demonstrate that exceptional and unpredicted occurrences have made performing its obligations overly onerous, to the point where they have substantially and completely modified the balance of the exchange under the contract (quid pro quo), all of which has resulted in an unreasonable imbalance in the reciprocal responsibilities.7 Further, an understanding of the principle of pacta sunt servanda is essential in order to appreciate the interplay involved in the simultaneous application of the rebus sic stantibus and pacta sunt servanda with respect to international commercial contracts.

The principle of pacta sunt servanda

In the history of international law, the dispute over stability and change – or the boundaries of pacta sunt servanda – has played a crucial role. The issue of when a State may deviate from treaty obligations due to new conditions appears to be a perennial issue. It is compounded by treaties’ natural ability to “freeze” legislation at the time of acceptance, thus fixing it at a specific point in time.

Contracts bind the parties, according to a fundamental contract law premise. Only with the approval of the other party can a party default, postpone, or change its contractual duties. To emphasise the importance of this crucial feature of contracts, the Romans developed the phrase pacta sunt servanda. This principle is so important in contract law that it has been attributed to Ferdinand I, Holy Roman Emperor from 1556 to 1564, and his modus operandi: “Let justice be done, though the world perishes.” The strict application of this fundamental contract law principle, on the other hand, may in some situations result in severely unfair outcomes, antithetical to good faith, which is also a significant factor in continental judicial systems.

Scholars and case law have typically defined any exemption to this fundamental principle very narrowly, but only as a way of avoiding any excessive and unfair effects that are regarded to be in contradiction with justice. The different civil law systems envisage particular procedures to deal with these extraordinary situations, such as

  1. the force majeure regime; and
  2. the rebus sic stantibus doctrine (or variants of the same).

In light of the above, parties to commercial contracts are at risk of defaulting on their obligations as a consequence of the Covid-19 epidemic, either directly as a result of government actions (e.g. lockdowns, curfews) or indirectly as a consequence of the demand shock produced by the pandemic. Distressed obligors argue that this is either:

  1. a force majeure occurrence that releases them from contractual obligations; or
  2. an unforeseen and unusual change of circumstances that warrants revising or rebalancing the contract’s provisions under the rebus doctrine (or similar legal constructs).

Moreover, the case of Balfour v. Balfour8 showed that not all agreements can be made as contracts. As a result, in order for any agreement to have legal effect, the parties must agree to carry out specific legal responsibilities. This rationale is reflected in the principle of pacta sunt servanda, which states that the parties have a legal obligation to keep their promises and that the agreement is obligatory on them to that extent.

The pacta sunt servanda idea has always had its limitations. Even though it is intellectually grasped, the legal impact is nullified if the base or subject-matter is eliminated. Even Roman Law stipulates that no contract is enforceable or enforceable in all situations.9 If a side failed to fulfil its contractual responsibilities, the contract could be terminated unilaterally (e.g. in the case of leases, mandates or contracts of sale). To apply the theory to its full impact, such an exception must be acknowledged.

It should be noted that the theory of clausula rebus sic stantibus has historically been used to undermine the principle of pacta sunt servanda.10As per this idea, a contract is only enforceable if the conditions at the time of the contract’s conclusion remain unchanged. Nevertheless, the essential beliefs of modern theory defining pacta sunt servanda have shifted. According to certain authors, modern contract law cannot be based on classical contract law viewpoints because those positions have necessarily become obsolete because of advances, as is also stated in the theory of radical change, which essentially makes the same argument. Others believe that because contract law’s scope is not limited to the sale of things, its principles must be adjusted to fit the length and width of its dimensions. In other terms, given the economic, social and basic issues, the rigidity of the pacta sunt servanda premise cannot be sustained. Irrespective of one’s perspective on the binding nature of contracts, the examination of legal grounds for contractual duty exemption has become increasingly relevant in recent years.

Concluding remarks

Looking into the various concepts underlying international commercial contracts, it is clear that along with a harmonious functioning of these concepts, various conflicts are also prevalent between them. Furthermore, a glimpse into the Indian law makes it clear that it has yet to fully examine such concepts, especially the notion of hardship, even though this concept has matured to some level under English Law, American Law, and certain European Law. Nevertheless, because India is a UNIDROIT participant, this concept will undoubtedly have persuasive value in Indian courts, and Indian courts may be asked to investigate whether this doctrine can be applied even where Indian law is the applicable law.

Further, it is impossible to deny that the theory has been heavily condemned for its role in jeopardising contractual consistency. Although it is important to remember that the doctrine of hardship is still evolving, and its parameters, like those of any other jurisprudential term, are never fully defined, but rather as broad as the categories of human behaviour. The theory was created to compensate for the flaws in the actual contract. An unexpected turn of event, such as a fully abnormal rise or decrease in prices, a rapid depreciation of the currency, an unanticipated hurdle to execution, or the like, frequently confronts the parties to an executory contract while carrying it out. Nevertheless, if the current legal system acknowledges the doctrine of hardship and provides reasonable consideration for the insertion of hardship clauses in contract terms, this problem can be successfully addressed. If the doctrine is applied correctly, it will undoubtedly benefit parties willing to engage in long-term commercial agreements, both domestic and international.

Lastly, further development concerning the notion of international commercial contracts is essential not only for the better application of domestic laws but also for clarifying the existing principles of international law, especially the doctrine of clausula rebus sic stantibus and the principle of pacta sunt servanda.

*Managing Associate, L&L Partners, New Delhi. Author can be reached at

**2nd year student LLB (Hons.), National Law University, Bhopal. Author can be reached at

1“Force majeure”, Black’s Law Dictionary (8th Edn., West Publishing Co. 2015).

2Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310 .

3Blociszewski, ‘L’Annexion de la Bosnie et de l’Herzegovine’, (1910) 17 Rev. Gen. de Dr. Int. Pub. 441.

4Elihu Lauterpacht,International Law: Disputes, War and Neutrality (5th Edn., Cambridge 2004), 14-15.

5Carrasco Perera, Ángel: ‘Debtor’s Release by Covid-Hardship (Rebus Sic Stantibus) in Financial Debts? Spanish Trends’, (2020) 36 JIBLR.

6United Kingdom of Great Britain and Northern Ireland v. Iceland, (1973) ICJ Reports.

7Gómez Pomar, Fernando, Alti Sánchez-Agullera, Juan, Cláusula Rebus Sic Stantibus: Viabilidad y  Oportunidad de su Codificación en el Derecho Civil Español, InDret 1/2021 (2021).

8(1919) 2 KB 571 (CA).

9R. Zimmermann, The Law of Obligations: Roman Foundations of the Civilian Tradition, (1992) KLTP576.

10Treitel, The Law of Contract (12th Edn., Sweet & Maxwell Ltd. 2007) 924.

Case BriefsHigh Courts

Bombay High Court: S.C. Gupte, J., held that a real estate developer cannot rely on usual ‘force majeure’ clause to deny possession to homebuyers.

The instant appeal challenged the Order passed by RERA Appellate Tribunal, Mumbai.

Original Complaint that was filed by the respondent was:

Respondent who was a flat purchaser and who had claimed interest from the appellant for the delay in handing over of possession of the premises, for the period from the date of possession stipulated under the agreement till the date of actual possession.

Further, it was stated that Maharashtra Real Estate (Regulation and Development) Act, 2016 while accepting the respondent’s claim awarded interest from January 2018; the adjudicating authority gave six months extension on a unilateral basis to the appellant by way of a grace period.

When the above-stated matter was carried in appeal by the respondent-complainant in RERA Appellate Tribunal it was held that there was no specific clause in the agreement, entitling appellant/promoter to any grace period of six months or otherwise.

Appellate Tribunal observed that the date of delivery of possession of the premises stipulated under the agreement was on or before 30 June 2017 and, accordingly, directed payment of interest from 01-07-2017 till the date of delivery of possession of the premises.

Appellant’s Counsel submitted that the agreement referred to above contained a clause that the possession date was subject inter alia to any cause beyond the control of the Developer including any order of the Centre, Local Authority or Body or due to delay in issuing completion certificate or occupation certificate by the Authorities.

It was noted from the above contention that the said clause was nothing but an ordinary force majeure clause, where the promoter cannot be faulted for the delay in delivery of possession, if such delay is caused by any reason beyond his control.

Force Majeure clause doesn’t provide for any grace period to the promoter.

Bench while considering the facts of the case stated that it is apparent from the record that the adjudicating authority was not impressed by any of the reasons submitted by the appellant towards the justification for the delay.

Adding to the above, Court found that the order of the adjudicating authority proceeded on the basis that even if facts pointed out by the Promoter were to be taken into consideration as justification for the delay, a six months’ grace period could be granted for delivery of possession to the Promoter.

“…neither the Appellate Tribunal nor the adjudicating authority found in favour of the Appellant/Promoter insofar as its case for justification of the delay was concerned.”

Hence, a grace period of six months considered by adjudicating authority was nothing but an ad-hoc measure and was rightly not accepted by the Appellate Tribunal.

Accordingly, the substantial question of law arose from Appellate Tribunal’s impugned order.

Therefore, the second appeal was dismissed. [Westin Developers (P) Ltd. v. Raymond Alexis Nunes, 2020 SCC OnLine Bom 3912, decided on 04-12-2020]

Advocates who appeared for the matter:

Dakshesh Vyas a/w Dominic D’Souza and Sumit Kothari i/b. Agrud Partners, for Appellant/Applicant.

Huzefa Nasikwala a/w Sujit S. Mashal i/b. Nasikwala Law Office, for Respondent.

Saket Court
Case BriefsCOVID 19District Court

District Court, Saket, Delhi: Raj Kumar Chauhan, J., directed “Miniso” to pay the rent arrears for the lockdown and post lockdown period stating that the company has no dearth of money as the company has been operating almost 10 similar premises on rent in Delhi successfully.


Allegations placed by the petitioners are that they had leased their property to respondent i.e. Miniso Life Style Private Limited.

Monthly Rent

Monthly rent of the leased out property was Rs 9,75,000/- plus GST per month and the same was to be paid in equal proportions to lessor 1, 2 and 3 as per the agreement signed between the parties.

Head of Business Development of Miniso i.e. respondent asked the petitioner to consider the waiver of rent for the time period of lockdown — April, 2020 to May, 2020.

Further, the petitioner informed the respondent that as per clause 12 of the agreement i.e. Force Majeure Clause was not applicable to the existing circumstances and respondent cannot take unjust and wrongful benefit of said clause.

Though the petitioners agreed to waive the penal interest on the delayed payment @18% p.a. but the respondent continued to threaten for creating third party interest in the demised premises.

Petitioners were represented by Counsels Gaganmeet Singh Sachdeva, Sumit Thakur and Counsel for the respondent was Akash Tyagi.

Legal Notice

Petitioners had to in view of the above circumstances send a legal notice for recovery of rent and arrears on 23-05-2020.

Later the respondent sent a proposal of paying 70% of the arrears of rent for the month of April and 90% of the rent for June and July, 2020.

Petitioners in good­faith and trust sent the invoices of the rent for the above stated months and requested the respondent to pay the payment after deducting 15% rebate for arrears of rent for April, May, alongwith rent of June and July.

Despite sharing the invoice the respondent did not clear the arrears of rent and stopped taking calls from the petitioners.

In view of the above circumstances, the present petition was filed.

Respondents contention was with regard to the maintainability of the petitions stating that Clause 12 of the Lease Deed provides eventualities wherein in case the demised Premises is, whether fully or partially, destroyed or damaged by any Act of God, such as by flood, earthquake, storm etc. save and except fire, becomes unfit for occupation or use, the rent payable by the respondent shall be suspended till such time as the Demised Premises is once again rendered fit for use and occupation by the respondent.

Counsel for the Petitioners relied upon the decision in, Sona Corporation India (P) Ltd. v. Ingram Micro India (P) Ltd., O.M.P (COMM.) 249/2018 and Ramanand v. Dr Girish Soni, R. C. Rev. No. 447 of 2017.

The above two cases were cited with respect to the contentions that Court under Section 9 of the Arbitration Act can direct the payment of rent due as well as future rent in the same manner as the Court can grant in a civil suit under Order 39 Rule 10 CPC.

Adding to the above, the latter case was relied upon to rebut the respondent’s claim for waiver of rent.


Bench on perusal of the referred provisions and sections of Arbitration Act and CPC held that the respondents are directed to pay admitted rent to the petitioner for the period which has not been paid for the leased premises alongwith future payment also be paid as per the lease deed.

Further, adding to its analysis of the facts, Court stated that on perusal of the force majeure clause in the agreement, it can be stated that the lessee is entitled to suspension of the rent only if the property has been damaged or destroyed by any force Majeure event.

Admittedly, the property in question has not been damaged/destroyed in force majeure event.

Hence, in view of the law laid down by Delhi High Court in the decision of Sona Corporation India (P) Ltd. v. Ingram Micro India (P) Ltd., O.M.P(COMM.) 249/2018 and Ramanand v. Dr Girish Soni, R. C. Rev. No. 447 of 2017, Court concluded its decision stating that,

“mere temporary non-use of the tenanted premises by the respondent and yet being in power and possession of the premises in view of the temporary lockdown due to the COVID-19 Pandemic, the said event cannot be covered under the force Majeure clause of the lease agreement.”

Therefore, the respondent cannot claim waiver of rent.

Hence the Court is empowered under Section 9 of the Arbitration Act to order payment of arrears of rent for the lockdown period and also post lockdown period.

In view of the above terms, petitions were disposed off. [Uma Sharma v. Miniso Life Style (P) Ltd., 2020 SCC OnLine Del 979, decided on 06-08-2020]

National Consumer Disputes Redressal Commission
Case BriefsTribunals/Commissions/Regulatory Bodies

National Consumer Disputes Redressal Commission (NCDRC): Prem Narain, Presiding Member, has directed the developers of “Greenopolis” to refund homebuyers their amount deposited at the interest rate of 9% p.a. and in a few complaints the bench has asked for the possession to be handed over by 30-09-2020 with the occupancy certificate and with a delayed penalty of 6% p.a. on the deposited amount.

Consumer Complaints

Allottees of the project “Greenopolis” situated in Gurgaon alleged deficiency in service on the part of Opposite parties — Three C Shelters (P) Ltd.

Original allottee booked an apartment in OP’s project for a consideration of Rs 87,16, 800/-, apartment was allotted and later the same was endorsed in favour of complainant.

OP’s failed to deliver the possession in 42 months inclusive of 6 months grace period. Till date, the complainant has paid Rs 75,96,776/- to OP’s.

Several complaints have been filed by homebuyers with regard to no delivery and possession of the apartments for which they have paid installments of a very huge amount.

Analysis and Decision

No breach of agreement by complainants | Entitled to relief under Sections 54 and 55 of the Indian Contract Act, 1872

Argument with regard to Sections 54 and 55 of the Indian Contract Act, 1872, OPs relied on the Commission’s decision in DLF Southern Town (P) Ltd. v. Dipu C. Seminal, wherein the complainant had deposited only the booking amount and no installments were paid whereas in the present complaints installment have been paid upto reasonable limit and on no progress in construction, the payment was stopped later.

Force Majeure

Defence of force majeure by OPs cannot be taken as there was no ban on construction and OPs should have put their resources and managerial skills to bring water from outside to complete the construction in time.

Joint Project

Three C Shelters (P) Ltd. pleaded for force majeure conditions for the delay and on the other hand Orris Infrastructure (P) Ltd. pleaded that Three C Shelters was responsible for delay in construction. Both of them had signed on the “Apartment buyer Agreement” and hence Commission stated that both of them were responsible for delay.

Apartment Buyer Agreement

Bench observed that the OP’s clearly have failed to complete the project and give the possession in time to the homebuyers as per the Apartment Buyer Agreement.

Hence allottees have the right to ask for a refund due to the inordinate delay which has been beyond 1 year, the possession was to be given in the year 2016.

No Forfeiture of earnest money

So far as the question of forfeiture of earnest money is concerned, it is seen that the complainants are seeking refunds as the project has been inordinately delayed. Even though the RERA, Haryana has taken a meeting to expedite the project and Three C Shelters (P) Ltd. has agreed to complete the project in phases.

Commission noted that OPs have not paid EDC and IDC to the Government and it seems that the OPs were not serious in timely completing the project. Thus, in these circumstances, there can be no question of forfeiture of earnest money.

Supreme Court in Haryana Urban Development Authority v. Diwan Singh, (2010) 14 SCC 770, observed that subsequent buyers are entitled to receive interest only after the date of endorsement in their favour.

In view of the above, Commission directed Three C Shelters to refund the amount at 9% interest per annum.

In one of the cases, Orris Infrastructure (P) Ltd. is directed to complete the construction work and handover the possession till 30-09-2020 after obtaining an occupancy certificate, and it shall pay interest of 6% p.a. on the deposited amount.

If the possession is not delivered till 30-09-2020, the complainant shall be at liberty to take a refund of the total deposited amount Rs 77,58,581/- along with interest @ 9% p.a. from the date of respective deposits till actual payment. [Sanjay Gupta v. Three C Shelter (P) Ltd., 2020 SCC OnLine NCDRC 178, decided on 20-07-2020]

Op EdsOP. ED.

Swiftness of the Coronavirus induced disruptions surely would have prevented any viable pre-preparation on part of those most affected. Resultantly, almost all businesses/industries/manufacturing units are likely to, as many already do, face unprecedented upheavals and alterations in their supply chains/workforce/expansion. It is in this background that industrial and manufacturing units, regardless of functioning via a written agreement or not, must prime themselves vis-à-vis the laws of frustration, contingency and force majeure.

In India, the law pertaining to contingency[1] and frustration[2] must be treated  as rules of positive law that oblige and outline specific rights and obligations thereof. On the other hand, force majeure is a derivation of civil law, particularly French Law, whereby it pertains to any supervening event or happenstance as may obviate and affect the ability of a party to the agreement from performing it. In India, ‘force majeure’ usually finds place in a contract thereby allowing for a certain degree of flexibility and play in contractual relations thereof. Though a lot is dependent on the actual language and construction of the said clause, the courts in India have leaned in favour of placing ‘force majeure’ within the umbrella of contingency.

The courts have in their wisdom expounded upon force majeure as an exclusionary clause being part of a mutual agreement between parties thereof. In such a scenario, operation of such a clause is to be found under, and has been limited to (albeit incorrectly as per me), the chapter dealing with ‘contingency’ rather than ‘frustration’.[3] It is conceded that the presence of a ‘force majeure’ clause clearly postulates that the parties were in the know of an event or several events (being exclusively a function of that particular clause) and agreed upon the same so as to render the agreement non-performable thereof. Contingency in a contract rests on (1) agreement between parties, (2) postulated upon a future uncertain event(s)/condition(s), (3) being collateral to the contract thereof, and (4) happening (or not) of such event/condition.[4] Therefore, having regard to the same, one would be hard-pressed to disagree with the law as laid down in the seminal judgment of Satyabrata Ghose v. Mugneeram Bangur and Co. [5] when it adjudges that:

“In cases, therefore, where the Court gathers as a matter of construction that the contract itself contained impliedly or expressly a term, according to which it would stand discharged on the happening of certain circumstances the dissolution of the contract would take place under the terms of the contract itself and such cases would be outside the purview of Section 56 altogether….In such a scenario it would be a derivative of Section 32.”

Though the Supreme Court has labelled ‘force majeure’ as a function of contingency, it is my submission that in essence such a clause is ex abundati cautela and in that it traverses the thin grey area between contingency and frustration. Furthermore, it has authoritatively been held that the presence of such a clause as specifies conditionalities vide which parties would stand discharged of their contractual obligations dispenses with application of the positive law rule enshrined in Section 56.[6] However, this is where I stand in disagreement with the law as laid down in Satyabrata Ghose (1954) and followed thereafter in Energy Watchdog (2017).

In effect, both the judgments as cited herein above have given primacy to the rule of construction premised on ‘intention of parties’ whereby, regardless of Section 56, a party may agree (albeit devoid of any undue influence and coercion) to honour a contract despite occurrence of circumstances as may fundamentally alter its scape; effectively allowing the contracting parties to override a statutory enactment in going ahead with their commitment despite disappearance/obliteration/fundamental alteration of the very object thereof. Surely such a construction leads to an anomalous situation whereby the statutory scope of ‘subsequent impossibility’ is smothered.

Take for instance Illustration (e) to Section 56 as per the Act, 1872;

“(e) A contracts to act at a theatre for six months in consideration of a sum paid in advance by B. On several occasion A is to ill to act. The contract to act on those occasions becomes void.”

 Evidently, as per this illustration, A’s illness is considered to be serious enough such as to excuse performance on the basis that it fundamentally alters the object of the said contract. Collating the said illustration to the situation prevailing currently whereby say ‘A’ is suffering from COVID-19 induced illness and is mandated by policy to isolate and quarantine for a certain time period. In this background, suppose the contract between ‘A’ and ‘B’ consists of a ‘force majeure’ clause such as to exclude an illness from rendering the contract void. As per the law contained in the above cited judgments, said clause would override Section 56 impossibility and despite the COVID-19 induced SARI, ‘A’ would be held liable to for breach.

The above approach, albeit in accordance with the law as at present, is not in harmony with public policy in such aberrant times. On the other hand it may be worth considering that if ‘A’ can prove that COVID-19 fundamentally prevents him/her from carrying out the object of the contract, then the lower threshold of the ‘force majeure’ clause must fall through in the face of an express statutory obligation and frustration induced discharge ought to follow. In conclusion, having regard to the above noted averment, ‘force majeure’ cannot and must not be treated as solely a function of contingency simply because of the argument resting on intention of parties and ensuing foreseeability (or not) of the event thereof.

*Author is a practising Advocate in Delhi

[1] See Chapter III, Contract Act, 1872

[2] See Chapter IV, Contract Act, 1872

[3] Energy Watchdog  v. CERC , (2017) 14 SCC 80

[4] See Section 30, Act 1872

[5] 1954 SCR 310

[6] Satyabrata Ghose v. Mugneeram Bangur and Co., 1954 SCR 310; followed thereafter in Energy Watchdog v. Central Electricity Regulatory Commission , (2017) 14 SCC 80


I. Introduction

The spread of dreaded coronavirus has led to serious disruptions across the globe, India being no different. The virus has caused an unprecedented and incalculable damage to the economies worldwide, a situation equated to the Great Depression 1921, and caused deaths of millions of people across the globe. It has led to such a situation that even day to day activity such as access to print media is difficult.

The lack of demand and consequent lesser production has resulted in loss of millions of jobs worldwide apart from causing insurmountable damage to the social and economic conditions of the world. Among all these pertinent issues which are being faced by people, one of them is the effect of COVID-19 on businesses.

Even as the economy has virtually come to a standstill and people are being directed to remain quarantined in their respective homes, several tenants are being evicted by their landlords due to their inability to rental amount.

II. Intersection between landlord — Tenant Disputes due to COVID19 

As most of these tenants, belonged to the lower stature of the society and were primarily migrants working in the unorganised sectors, were left stranded on the streets high and dry and thus resultantly the Government had to step in to provide them basic facilities through shelter home and hunger relief camps. Further, as majority of these tenants were living in the tenanted premises on the bases of oral agreement and with the understanding that rental dues would have to be paid on month to month basis were also deprived of many essential safeguards provided under the law.

Insofar as commercial leases are concerned such as those of shops in shopping complex, office spaces, etc. are concerned, it is bit unclear whether the tenant can take recourse to the force majeure clause, assuming that such a clause is present in the lease deed in the first place, to avoid paying the rental amount till the lockdown persists. There is lack of clarity on this issue due to lack of authoritative judicial precedent and even after the lockdown is lifted, the businesses as such may find it difficult to pay the rent as it will take considerable time for the economy to bounce back to the same level as it was prior to the lockdown, further it is also to natural to expect that there would be significant reduction in consumer spending post the lockdown due to reduced purchasing power of the consumer.

III. Statutory framework and force majeure clause 

In India, the relationship between the landlord and the tenant is governed by various statues viz. the Contract Act, 1872[1] (hereafter, ‘the Contract Act), the Transfer of Property Act, 1881[2] (hereafter, ‘the Property Act), the Delhi Rent Control Act, 1958[3] (hereafter, ‘the Rent Control Act) etc.

Section 56 of the Contract Act stipulates when a contractual obligations may be excused, an extract whereof is reproduced herein below –

S.56. Agreement to do impossible act.— An agreement to do an act impossible in itself is void.

Contract to do an act afterwards becoming impossible or unlawful.— A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.’

However, it may be a bone of contention if one take resource of the aforestated provision in order to wriggle out of its liability to contractual rent amount especially when the relationship between the parties should be governed by the Property Act or the Rent Control Act, as the case may be, as both these two statues are special statues and it is well-settled law the special law prevails over the general law[4]. Further, as the relationship of landlord and tenant are based upon the lease deed/lease agreement which is primarily a contractual agreement and the disputes, including non-payment of rent, if any, shall be governed strictly under the terms and conditions provided thereof.

In addition to the definition of force majeure clause provided under the respective lease deed, to understood its true import, one may refer to their definition in general sense –

Black’s Law Dictionary, 8th Edition, defines force majeure as ‘A contractual provision allocating the risk if performance becomes impossible or impracticable, esp. as a result of an event or effect that the parties could not have anticipated or controlled.’

Similarly, Oxford Dictionary defines force majeure as ‘unexpected circumstances, such as war, that can be used as an excuse when they prevent somebody from doing something that is written in a contract.

It is to be noted that that term ‘force majeure’ is not to be equated as an ‘act of God’ as the former is of wider import than the latter. However, it has to borne in mind that since the former is an exception to the general rule of performance of contract, the same has to be construed narrowly.[5]

However, it is not the first time that the contracting parties have resorted to force majeure clause citing impossibility/frustration of performance, some of these cases wherein it has invoked earlier are –

In Bikram Chatterji  v. Union of India[6], it has been opined by the Supreme  Court that: (SCC Online para 129)

‘129. A blatant violation of the provisions of RERA has been done by the Amrapali Group. Since RERA contemplates timely completion of projects once registration has been granted Under Section 5 and extension of registration. Under Section 6, it is only in the event of force majeure in case there is no default on the part of the promoter, registration can be extended in aggregate for the period not exceeding one year. Force majeure shall mean a case of war, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature…..’                                                                                           

(emphasis supplied)

Similarly, in another case Dhanrajamal Gobindram v. Shamji Kalidas and Co.[7], the Supreme Court has opined as under –

‘19. McCardie, J. in Lebeaupin v. Crispin[8], has given an account of what is meant by “force majeure” with reference to its history. The expression “force majeure” is not a mere French version of the Latin expression “vis major”. It is undoubtedly a term of wider import. Difficulties have arisen in the past as to what could legitimately be included in “force majeure”. Judges have agreed that strikes, breakdown of machinery, which, though normally not included in “vis major” are included in “force majeure”. An analysis of rulings on the subject into which it is not necessary in this case to go, shows that where reference is made to “force majeure”, the intention is to save the performing party from the consequences of anything over which he has no control. This is the widest meaning that can be given to “force majeure”, and even if this be the meaning, it is obvious that the condition about “force majeure” in the agreement was not vague. The use of the word “usual” makes all the difference, and the meaning of the condition may be made certain by evidence about a force majeure clause, which was in contemplation of parties…’

In a very recent judgment rendered by the Bombay High Court in ‘Standard Retail Pvt. Ltd. v. G.S. Global Corp.[9]’, the  High Court has refused to accept the contention that COVID-19 pandemic and the lockdown declared by the Central/State Government would either tantamount to frustration, impossibility and impracticability of the contract or the same can be termed as a ‘force majeure clause’, and thus has declined to restrain the respondent therein from encashing the Letters of Credit opining inter alia that production of steel comes within the ambit of essential commodity and there was no restriction of movement of the same, an extract of the judgment is reproduced herein below –

2. It is the case of the petitioners that in view of the COVID-19 pandemic and the lockdown declared by the Central/State Government, its contracts with Respondent1 were terminated as unenforceable on account of frustration, impossibility and impracticability. The petitioners have relied upon Section 56 of the Contract Act, 1872.

** *

4. Having heard learned counsel for the petitioners and learned Senior Counsel forRespondent1 (in the first 3 petitions), learned counsel forRespondent1 (in the last 2 petitions), the learned counsel forRespondent3, Bank (the first 3 petitions), in my view the petitioners are not entitled to any ad interim reliefs for the reasons stated herein-below:***

e. In any event, the lockdown would be for a limited period and the lockdown cannot come to the rescue of the petitioners so as to resile from its contractual obligations with Respondent 1 of making payments.

f. The judgments relied upon by the learned counsel for the petitioner in Energy Watchdog v. CERC[10]and Satyabrata Ghose v. Mugneeram Bangure & Co.[11] do not assist the case of the petitioners and are distinguishable on facts.”

However, the Delhi High Court in ‘Halliburton Offshore Services Inc. v. Vedanta Limited[12] has opined  in para 20 that ‘The countrywide lockdown, which came into place on 24th March, 2020 was, in my opinion, prima facie in the nature of force majeure’, and thus thereby granted an ad interim stay on invocation and encashment of the bank guarantees.

Pertinently, both the aforestated two cases where instituted under Section 9 petition of the Arbitration and Conciliation Act, 1996[13], seeking the relief of injunction against the respondent.

Although, these aforementioned cases can be distinguished on the basis of the facts and were not pertaining to landlord – tenant dispute but nevertheless do aid in interpreting the term ‘Force Majeure Clause’, as perhaps it has been the first time, since the Spanish Flu in 1919, that a disease has spread to such an unimaginable extent that it was termed as global pandemic by  WHO, which further adds to the ambiguities due to lack of authoritative judicial precedent on the issue in hand i.e. if the spread of COVID-19 amounts to force majeure.

Also, one may argue that even if the lockdown is in continuance, the tenants have continued to enjoy the possession of the tenanted premise and thus have unjustly enriched themselves at the cost of the landlord, thus the tenant ought to have paid the rent and lack of business thereof shall not be a ground for non-payment of rent. In this regard the judgement rendered by the Andhra Pradesh High Court in ‘Gandavalla Munuswamy v. Marugu Muniramiah[14], is quite apt, the relevant extract thereof is reproduced herein below –

9…In my opinion, such an indirect and, what is more ambiguous course of action on the part of a lessee cannot be regarded as sufficient for conveying to the lessor his intention to treat the lease as void under section 108(e). The lessee must directly and categorically express to the lessor his intention to treat the lease as void. Otherwise, it will be legitimate for the lessor to regard the lease as subsisting. There is nothing in Section 108(e) of the Transfer of Property Act which compels a lessee to treat a lease as void. It is optional with him to do so or to refrain from doing so. This aspect of the matter makes it all the more necessary that an unambiguous declaration of the lessee’s intention to treat the lease as void must be communicated to the lessor. The lessor would not otherwise be able to take appropriate steps on the footing that the lease has come to an end and he is therefore at liberty to deal with the property as he chooses. What is even more important is that a mere declaration of intention to treat the lease as void is not sufficient. The lessee must also yield up possession of the property to the lessor as required by the provision of the section 108(q) of the Transfer of Property Act. He cannot continue in possession and yet declare that he has treated the lease as void. That would obviously be an inconsistent and impermissible position to adopt. So long as a lessee has not surrendered to his lessor the possession which he obtained from the latter at the time of the lease, he cannot rid himself of his obligations under the lease. His holding to the possession into which he was inducted by his lessor will estop him from disputing the right of his lessor to evict him and to recover possession from him...”

Recently, the Delhi High Court in Ramanand v. Dr. Girish Soni[15], has held in relation to a landlord–tenant dispute governed by the Rent Control Act, that suspension of payment of rent by tenants owing to  COVID-19 lockdown crisis would not be justified though some relaxation may be given in the schedule of payment, the relevant extract is reproduced herein below:

“3. The urgent application under consideration, raises various issues relating to suspension of payment of rent by tenants owing to the COVID-19 lockdown crisis and the legal questions surrounding the same….

* * *

31. Finally, in the absence of a contract or a contractual stipulation, as in the present case, the tenant may generally seek suspension of rent by invoking the equitable jurisdiction of the Court due to temporary non-use of the premises. The question as to whether the suspension of rent ought to be granted or not would depend upon the facts and circumstances of each case as held by the Supreme Court in Surendra Nath Bibran v. Stephen Court[16]. In the said case, the Court directed payment of proportionate part of the rent as the tenant was not given possession of a part of the property…

The aforesaid case throws some light if one can rely upon the force majeure clause to justify non-payment of rental amount, however, the said case can be distinguished on the basis of the facts, as in that case the Court had already directed eviction of the tenant much prior to the coronavirus pandemic and the said judgment came to be delivered upon an application seeking suspension of rent. Moreover, the Court has itself noted in para 26 that ‘The question as to whether the suspension of rent ought to be granted or not would depend upon the facts and circumstances of each case as held by the Supreme Court in Surendra Nath Bibran v. Stephen Court[17], further the entire contract, if any, executed between the landlord and the tenant has to be kept in mind while deciding if non-payment of rent was justified or not.

IV. Government and Judicial Intervention

In the United Kingdom, the Government has passed the Coronavirus Act, 2020[18] w.e.f. 20th March, 2020, in view of the plight of tenants, with the objectives of protecting the tenant’s interest and thereby suspends the landlord’s right to evict business tenancies in England and Wales till normalcy is restored.

Similarly, even in India, the Ministry of Home Affairs (MHA) vide order dated 29th March, 2020 has inter alia directed the landlords of rented accommodation not to demand rent for a period of one month from workers including migrants.  Further it also has been directed that the  landlord shall not force labourers and students to vacate their premises and any violation thereof shall foist criminal action on them including but not limited to the Disaster Management Act, enforcement whereof is the responsibility of the respective State Government and Union Territory.

In addition to this, several PILs also have been filed before the Supreme Court and High Courts seeking exemption from paying rent during the lockdown, non-deduction of wages during the lockdown period, non-termination of workers/employees by the employers, waiver of Interest on EMIs during COVID lockdown, etc. Needless to say that the higher judiciary, which is already functioning in a limited capacity and conducting its proceedings through video conferencing, has become the hub of PILs. 

V. Conclusion 

In  view of the aforesaid, it is difficult to say with certitude as whether the tenants can avoid paying rental amount for the period of lockdown citing force majeure clause, primarily due to lack of judicial precedent coupled with the factum that the interest of tenants are being protected by executive direction rather than legislative command. All in all, it is quite certain that once the lockdown is lifted and normalcy of courts is restored, several cases are going to be instituted either seeking eviction and/or arrears of rental amount from the tenants.

*Author is advocate by profession, practising and appearing before the High Court of Delhi and other tribunals and courts situated in Delhi. Author can be reached at for any suggestions/comments.

[1] Act No. 9 of 1872

[2] Act No. 4 of 1882 

[3] Act No. 59 of 1958 

[4] In Kidar Lall Seal  v. Hari Lall Seal,1952 SCR 179, the  Court had opined that “It is an established principle that where there is a general law and a special law dealing with a particular matter, the special excludes the general.” See also Dhruv Dev Chand v. Harmohinder Singh , (1968) 3 SCR 339

[5] See Energy Watchdog v. CERC, (2017) 14 SCC 80

[6] 2019 SCC OnLine SC 901 

[7] (1961) 3 SCR 1020 

[8] [1920] 2 KB 714

[9] 2020 SCC OnLine Bom 704  

[10] (2017) 14 SCC 80

[11] 1954 SCR 310

[12] 2020 SCC OnLine Del 542 

[13] Act No. 26 of 1996  

[14] 1964 SCC OnLine AP 20 

[15] 2020 SCC OnLine Del 635  

[16] (1966) 3 SCR 458  

[17] Ibid.

[18]Available at , last visited on 1st May, 2020.

[19] Noti. No. 40-3/2020-DM-I(A), dated March 29, 2020

[20] Many PILs have been filed on this subject such as Supreme Court Bar Association’s PIL on Government scheme for payment of office rent during lockdown; PIL to restrain landlords from evicting student and labourers; PIL on welfare schemes for migrant workers, etc.


COVID -19 dropped itself like a bomb on industries, consumers and economies. The world is still putting itself together from this crisis. The business fraternity however, has never really anticipated any sort of complication or even for that matter, viewed their ‘force majeure’ clauses seriously. Now, that many contracts hinge on ‘force majeure’, a series of questions arise on its invocation. This article looks to condense available material on ‘force majeure’ and looks at the steps ahead.

Force Majeure and general clause:

The term ‘force majeure’ originates from the Code Napoléon of France, that translates to mean ‘superior force’ or ‘greater force’. Ordinarily, this means a drastic or a fundamental change to the substance of the contract that is brought about by an event that was neither anticipated by the parties nor under their control, resulting in non-performance of their contractual obligations. 

In India, since the concept of force majeure is not codified into law, it would be necessary to coin this as part of the contract. Scores of precedents have held that the contract overrides the law and therefore ‘force majeure’ clauses are now part of the standard clauses in any contract along with confidentiality and dispute clauses.

Several examples of force majeure clauses exist. One such instance is as under:

a. The event of ‘force majeure’ such as an act of God, fire, earthquake, flood, accident, an act of governmental authority, lockout or any event beyond the reasonable control of any of the parties that hinder the performance or render it impossible;

b. The duration of force majeure event – typically between 15-60 days;

c. The manner in which this clause needs to be invoked including notices etc.;

d. Suspension or termination of agreement in case the event continues beyond the stipulated period.

Most often, drafting a ‘force majeure’ clause lacks inclusion of details. For instance, majority of the ‘force majeure’ clauses, do not specifically mention ‘pandemic’ or even ‘epidemic’ for that matter, as an event.

Indian Contract Act & Force Majeure:

Although the term ‘force majeure’ finds no presence under the Contract Act, 1872 (“the Act”), its doctrine can be found embodied under Section 32[1] of the Act which renders a contract void when an event upon which performance of contract is contingent becomes impossible.

Essentially, COVID-19 will find a mention in contracts in the form of epidemic, pandemic, or even natural calamity. However, it is noteworthy that where the failure to perform an obligation is primarily due to lockdown implemented by the Government, the force majeure clause must also contain term ‘lockdown’, for it to be invoked. One can also argue that since the lockdown is a result of COVID- 19 and the pandemic, reliance can be placed on the term pandemic in a ‘force majeure’ clause.

The COVID-19 pandemic or the resultant lockdown, will not be treated as ‘force majeure’, if there are other methods of performing the terms of the contract. Having said that, performance of the contract may be suspended during the operation of ‘force majeure’ event and performance may be suitably extended. Parties have the option of renegotiating and modifying the contractual terms, termination is the last step if the force majeure event continues beyond the time prescribed under the contract.

Therefore, construing COVID-19 lockdown a ‘force majeure’ event will depend on the contractual obligations binding the parties and the manner of its performance. 

Several questions have been raised on the fact that some contracts do not stress on ‘pandemic’, ‘epidemic’, ‘disease’ etc. While some parties may rely on the general phrase ‘any other unforeseeable event, not under the control of either of the parties’, a reference may be drawn to some Government notifications and departmental circulars across board, which have declared COVID- 19 and the lockdown as a natural calamity/disaster.

The Ministry of Finance has for instance, by way of an office memorandum dated February 19, 2020[2] with respect to ‘Manual for Procurement of Goods, 2017’, clarified and declared the disruption in supply chains which is a result of COVID-19 from China or any other country, such a disruption will be covered as ‘force majeure’.

The Ministry of New & Renewable Energy with respect to solar project developers, vide office memorandum dated March 20, 2020[3] has declared that parties can invoke the force majeure clause to avoid financial penalties if they miss the contractual obligations on account of COVID-19.

The Karnataka RERA Authority, through its Circular dated April 06, 2020 extended the registration of all real estate projects by a period of three months, in cases where registration is expiring after March 15, 2020 and has also extended the timelines for compliance of the RERA Act by a period of three months.

The Ministry of Electronics and Information Technology[4] has decided to provide rental waiver to small housed in STPI premises (MSMEs, Start-ups) in the country from March 1, 2020 till June 30, 2020 i.e. for 4 months period as of now.

While these notifications, memorandums and circulars do not have a binding effect for all contracts, these will have some persuasive value to bring COVID- 19 and the lockdown under the ambit of force majeure, if there are specific terms in the clause.

Doctrine of Frustration under Indian Law

Where a contract does not feature a ‘force majeure’ clause, Section 56[5] of the Act in the context of doctrine of frustration will be examined. Section 56 creates 2 kinds of impossibilities: (1) Impossibility existing at the time of the making of the contract, and (2) A contract, which is possible and lawful when made, but becomes impossible and unlawful thereafter due to some supervening event. Para 2 of Section 56 above, will have a relevance given the pandemic and lockdown.

For such a clause to be invoked, the following are the requirements:

a. a valid and subsisting contract between the parties;

b. there must be some part of the contract yet to be performed; and

c. the contract becomes impossible of perform.

The consequences of the ‘force majeure’ event will have to be assessed to determine whether it renders the contract impossible, unlawful, or impractical to perform and thereby frustrate its performance. Where it is established that the conditions have materially affected the parties and their obligations and where there is no way to perform the contract during the existence of such conditions, the contract is annulled and both contracting parties are discharged of their subsequent obligations. Under these circumstances, neither party has the right to sue the other party for breach of such contract.

The Supreme Court had interpreted the concept of ‘force majeure’, in Satyabrata Ghose v. Mugneeram Bangur & Co.[6], under Section 56 of the Contract Act. The Supreme Court in this case held that the word “impossible” ‘has not been used here in the sense of physical or literal impossibility’[7]. The determination of whether a ‘force majeure’ event has actually occurred, does not centre around its impossibility alone – a mere ‘impracticality of performance’ (given the subject-matter of the contract), will also suffice. When an ‘untoward event’ or ‘unanticipated change of circumstance’ changes the very foundation of the contract between the parties, this event will be considered a ‘force majeure’ and the contract therefore impossible to perform.

While there have been many judgments on this issue and scores of articles on this topic, we look at one recent decision of the Supreme Court in  Energy Watch Dog v. CERC[8] to buttress the fact that “economic hardship” cannot be considered a ‘force majeure’ event. The judgment also has various other aspects, which are extracted as under:

“37. It has also been held that applying the doctrine of frustration must always be within narrow limits. In an instructive English judgment namely, Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH[9], despite the closure of the Suez canal, and despite the fact that the customary route for shipping the goods was only through the Suez canal, it was held that the contract of sale of groundnuts in that case was not frustrated, even though it would have to be performed by an alternative mode of performance which was much more expensive, namely, that the ship would now have to go around the Cape of Good Hope, which is three times the distance from Hamburg to Port Sudan. The freight for such journey was also double. Despite this, the House of Lords held that even though the contract had become more onerous to perform, it was not fundamentally altered. Where performance is otherwise possible, it is clear that a mere rise in freight price would not allow one of the parties to say that the contract was discharged by impossibility of performance.

38. This view of the law has been echoed in ‘Chitty on Contracts’, 31st Edition. In paragraph 14-151 a rise in cost or expense has been stated not to frustrate a contract. Similarly, in ‘Treitel on Frustration and Force Majeure’, 3rd Edition, the learned author has opined, at paragraph 12-034, that the cases provide many illustrations of the principle that a ‘force majeure’ clause will not normally be construed to apply where the contract provides for an alternative mode of performance. A more onerous method of performance by itself would not amount to a frustrating event. The same learned author also states that a mere rise in price rendering the contract more expensive to perform does not constitute frustration.”

The term impossibility and frustration are often used interchangeably. In a situation where there is no force majeure clause, Section 56 and doctrine of frustration comes to rescue. Frustration is a common law doctrine. It is concerned with the change in circumstances that can wholly destroy the object or foundation of the contract or make performance fundamentally different from what the parties contemplated in the beginning. Hence under English Law, one needs to establish functions by the English Code and under Indian Law, impossibility or frustration has been statutorily covered under Section 56 of the Act. If a party can prove that an unforeseen event has destroyed the object of the contract, or fundamentally changed the nature of performance, then the contract would be said to be frustrated and it would automatically come to an end. 

Evidence of force majeure:

It should be noted that the Courts in India follow the contract strictly in terms of force majeure clauses. In a case where the contract must be rescinded on account of a force majeure event, the burden to prove is on the party claiming force majeure. Unless there is compelling evidence that a contract cannot be performed under any circumstance, the Courts do not favour parties resorting to frustration of contract and termination.

The following may form as evidence for invoking force majeure:

  1. National and State Government notice and guideline imposing restriction of trade,
  2. News articles related to COVID-19 outbreak, quarantines, restricted travel and mandatory shutdown of airports, trains stations and seaports,
  3. Cargo booking and freight agency agreement,
  4. Cancelled flight or train ticket or anything other documents relating to travel itinerary, and
  5. Cancelled visa or rejected visa application.

Judicial Precedents during Lockdown

Bombay High Court – Pledge of Shares: Rural Fairprice Wholesale Ltd.  v. IDBI[10], March 30, 2020

Rural Fairprice Wholesale Limited (RFWL) has raised INR 670 crores in debt via insurance of NCDs – secured by shares held by Future Corporation Resources Private Limited (FCRPL)  in future retail limited (pledged shares):

  • Due to COVID-19 pandemic and the subsequent fall in the stock market, the value of the pledged shares fell – debenture trustees accelerated payments and invoked the pledged shares;
  • RFWL approached the Court seeking restraint of sale of pledged shares – contented fall in value of the pledged shares caused by COVID-19 pandemic and fall in stock market;
  • Bombay High Court granted interim relief restraining action in furtherance of the sale notice issued by debenture trustee.

Delhi High Court – Classification of NPA: Anant Raj Ltd v. Yes Bank[11], April 6, 2020

  • Borrower approached the court seeking restraint against lender from downgrading its asset classifications from SM A – 2 to NPA, on the basis of RBI’s COVID-19 regulator package;
  • Defaulting instalment fell due January 01, 2020;
  • Delhi High Court held statement of development and regulatory policies issued by RBI on March 27, 2020 along with regulatory package intended to maintain status quo as on March 01, 2020;
  • Asset classifications can be altered – status code to be maintained;
  • Time granted for payment of January instalment.

Bombay High Court – Invocation of LC’s: STANDARD RETAIL PVT. LTD. V. G.S. GLOBAL CORP[12]. , APRIL 8, 2020

  • Steel importers approached Court seeking restraint of encashment of letters of credit provided to Korean based exporters – claimed lock down hand rendered performance of contract impossible;
  • Bombay High Court refused the injunction:
  1. letters of credit are independent contracts with the bank;
  2. distribution of steel was recognised by government advisories as an essential service no restriction on movement;
  3. the lockdown was for from limited period;
  • The force majeure clause was only to aid exporters and not importers.

Bombay High Court — Transcon Iconica Pvt Ltd.  v. ICICI Bank[13] , April 11, 2020

  • Writ petitions filed by Transcon Sky City and Trancscon Iconica which had availed financing facilities from ICICI Bank defaulted on payments due on January 15, 2020 and February 15, 2020;
  • Determination of whether the moratorium is excluded for NPA classification;
  • Bombay High Court held (i) the period from March 01, 2020 to May 31, 2020 during which there is a lockdown will stand excluded until the lockdown is lifted, (ii) the reprieve is predicated on the lock down and not RBI moratorium, (iii) the borrower was put to terms as a consequences for non-compliance.

Delhi High Court: Invocation of Bank Guarantees: Halliburton Offshore Services Inc. v. Vedanta Ltd.[14] , April 20, 2020:

On an application filed by Halliburton Offshore Services Inc., which sought to restrain Vedanta Ltd. from encashing 8 bank guarantees issued in its favour to secure performance of obligations under a contract to drill petroleum wells, the Delhi High Court granted interim relief observing that the petitioner is not engaged in, stricto sensu, in the production of petroleum, but is, rather, engaged in drilling of wells, which activity is substantially impeded by the imposition of the lockdown and thereby an ad interim injunction, restraining  invocation or encashment of the bank guarantees, till the expiry of exactly one week from May 3, 2020 was granted.

Delhi High Court: Ramanand  v. Dr. Girish Soni[15], May 21, 2020

Application made by the petitioner (tenant), seeking suspension of rent on account of ’force majeure’ due to COVID-19 lockdown, the Single Judge observed that:

  • There is no rent agreement or lease deed between the parties, Section 32 of the Contract Act has no applicability.
  • The subject premises is governed by the provisions of the Delhi Rent Control Act, 1958 hence, Section 56 of the Contract Act does not apply to tenancies.
  • The petitioners have not urged that the tenancy is void under Section 108 (B)(e) of the TPA.
  • Considering factors such as nature of the property, financial and social status of the parties, amount of rent, any contractual condition(s) (relating to non-payment or suspension of rent), protection under any executive order(s) by the MHA, the application of the petitioners was rejected while granting postponement or relaxation in the schedule of payment of rent. However, it was clarified by the court that doctrine of frustration of contract or impossibility of performance does not apply to lease agreements.

**Authors are Founder and Senior Associate respectively with Shivadass & Shivadass (Law Chambers). The contents and comments of this document do not necessarily reflect the views/position of  Shivadass and Shivadass (Law Chambers) but remain solely of the author(s). For any further queries or follow up, please contact

[1] Section 32, Contract Act, 1872  

[2] Noti. No. F.18/4/2020-PPD

[3] Noti. No. 283A8/2020-GRID SOLAR 

[4] Months’ Rental Waiver to the IT Companies Operating from (STPI) dt. 16-4-2020 

[5] Section 56, Contract Act, 1872  

[6] 1954 SCR 310

[7] See, para 9 of Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310

[8] (2017) 14 SCC 80

[9] [1961] 2 WLR 633 : 1961 (2) All ER 179 

[10].Rural Fairprice Wholesale Ltd.  v. IDBI, 2020 SCC OnLine Bom 518

[11] Anant Raj Limited v. Yes Bank Limited, 2020 SCC OnLine Del 543

[12] Commercial Arbitration Petitions Nos. 404 to 408 of 2020, judgment dated 08.04.2020

[13] 2020 SCC OnLine Bom 626

[14] 2020 SCCOnLine Del 542

[15] RC. REV447/2017, order dated 21-5-2020


The financial stability of the aviation industry has been severely crippled due to COVID-19 pandemic. As the “big bird” is an expensive affair, most of the aviation industries resort to take aircrafts on lease rather than purchasing them. Across the globe, nearly 70% of the air fleets are grounded, which has hampered their ability to satisfy their obligations[1] and fulfil the requisites stipulated under aircraft lease agreements. Further, the decline in passenger revenue and demand which is also expected to mitigate by USD 8.8 billion and 36% respectively[2], together with various other taxes, levies and aeronautical charges, have created a burden on the lessee forcing them to file for bankruptcy. For escaping this liquidity crunch one may argue to bring in the “Force Majeure” or “Doctrine of Frustration” or “illegality clause”. But as far as the aviation industry is concerned, the above-mentioned tenets have a very little say. It is due to the general practice of incorporating “hell and high water clause” (herein referred to as ‘HOHW’) in aircraft lease agreements. The HOWH clause will play a pivotal role for understanding the implications of COVID-19 on the aviation industry as this clause renders the lessee unconditionally and entirely responsible for payment of the rent, irrespective of the unforeseen circumstances which have affected the airline’s operations. The authors in this article will ponder upon various facets of HOWH clause in tandem with other provisions of contract. Further, emphasis will be laid upon the extent to which the clause is enforceable. Lastly, suggestions and futuristic approach for the lessee will be dealt with.


In India, most of the aircraft lease agreements are governed by common law. It is pretty evident to apply common law, especially, English Law, for regulating the lease agreement. The only thing worth noting is that the rights arising out of the lease, which the parties are trying to enforce through English Law should not be in derogation with the public policy or any other law of India[3]. As per the current standards, the lease agreements are characterised by two principal features. The first principle feature is the delivery of the aircraft in ‘as is, where is’ basis whereas the second feature relates to the ‘HOWH’. Both the features when clubbed together leave the lessee helpless in situations such as Covid-19, where the fulfilment of obligations is severely curtailed. However, there are certain tenets of contract which may act as a safe haven for the contracting parties.

Under the contract law, force majeure is a provision which makes the performance of a contract impossible and absolves the party from non-performance of contractual obligations which is caused by circumstances or events out of the parties’ control. If an aircraft lease has incorporated force majeure—which in itself would be rare—then the corona virus pandemic could eventually qualify as a force majeure event. It is important to note that the relevancy of this tenet is dependent upon its express mention in a lease agreement; no automatic or implied assumption of force majeure is permissible. Therefore, it is highly unlikely that a court would impliedly infer force majeure in an aircraft lease where the parties had not expressly provided for one. The aircraft leases are typically  HOWH agreements which further overshadow the invocation of force majeure making its imposition even less likely.

Alternatively the lessee can invoke the Doctrine of Frustration emphasising upon the fact that grounding of aircraft fleet due to the orders of the government has made the performance of the contract impossible. As per the doctrine, if some unforeseen circumstance occurs during the performance of a contract which makes it impossible to perform, in the way that the fundamental basis of the contract requires, it need not be further performed, as insisting upon such performance would be unjust [4].

The bar or the threshold for claiming Doctrine of Frustration has been kept very high which could be a problematic contention to make for the airlines, therefore the fact that COVID-19 has made a dent upon the stability of many business entities would not, by itself, frustrate a contract[5] to which that entity was a party.

Another potential alternative for the airline companies can be “price negotiation” clause or the “illegality event” clause. The former clause is not much in practice under the English Law governed contracts due to the general principle[6] that an agreement to agree is not enforceable. However, if the parties have included the price negotiation clause in their contract, then it can certainly be a relief for the airlines as a mishap of COVID-19 will definitely fall under it.

Under the latter clause, the illegality is occurred due to change in law or any scenario for that matter by the government intervention, which makes the performance of the contract impossible for the lessee. In the current scenario, the standard operation of flying aircraft has been changed due to the pandemic; the obligation of the lessee towards the lessor of paying rent has not been affected. Accordingly, this pandemic is, therefore, unlikely to fall under the definition of an “illegality event” or constitute a “change in law”.[7]

It is now pretty evident that the  HOWH is rigid, in comparison to other tenets of contract, leaving the lessee helpless.


It is a well-confirmed postulation of common law that HOWH place an absolute, irrevocable and unconditional obligation on the lessee to make the necessary lease payments, notwithstanding the happening of any circumstance of any nature whatsoever[8]. In Olympic Airlines v. ACG[9], the rigidity of the clause was further strengthened by the court after stating that the risks which are inherent in the aircraft lease have to be borne by the lessee and the clause will forbid him to claim force majeure or frustration of contract.

The flexibility of the clause is not apparent prima facie, due to the rigid meaning to the clause. However, flexibility in the clause can be inferred from different views of courts wherein some have restricted the application of the clause whereas, some have sustained it. In Equitex, Inc. v. Ungar[10], the Court disregarded the HOWH and held that permitting the hindering party to benefit from its intentional or wilful wrongful act would violate public policy and thereby will be unenforceable.

On the other hand, the HOWH clause was enforced against a lessor of copiers whose equipment was damaged when Hurricane Sandy flooded FPL’s Long Island offices. The Court, in this case, rejected the argument that the lessee could not have assumed the risk of loss because Hurricane Sandy was not reasonably foreseeable, concluded that “the contract explicitly assigns to the assessed risk of loss from ‘any cause whatsoever’ and requires FPL to make monthly payments regardless of whether the copiers get damage.”[11]


It is well within the fundamental principle of contract to have an entitlement of being paid. However, if the liquidity of the lessee (airline) is crippled it will not be in the interest or favour of the lessor to drive them against the wall. It must be kept in mind that many other industries depend upon the aviation[12] industry for their survival like travel and tourism; the stubbornness of the  HOWH clause can lead to the liquidation of many airlines causing a ripple effect. There are two options left for the contracting parties, the first one is to allow the lessee to commit default where the lessor will assume the possession of the aircraft in ‘as is, where is’ basis, whereas the second option is to renegotiate the payment obligations disregarding the clause and deferring the entire payment including inter alia a standstill for an agreed period along with an agreed repayment plan.


The risk allocation of the aircraft operating leases is asymmetric in nature due to the fact that the obligations of lessors are limited in comparison to lessee. The extensive obligations of lessee to meet the payment under any circumstance further refute the scope of “rental holiday” by virtue of “HOWH” clause. Post-pandemic crisis, the parties (especially the lessee) should bear in mind to have some mechanisms in place which can be of assistance during such unforeseen events. The operating lease should be drafted in such a manner which can allow the airline to implement a consensual restructuring at times of distress. It should involve the rescheduling the debt which will have the potential of alleviating the liquidity pressure at times such as COVID-19 through Scheme of Arrangement or Company Voluntary Arrangement[13]. Further, price negotiation clauses can also act as potential option which will allow the contractual parties to competently set some temporary standards of transactions. At last the aviation industry have to learn aftermath the pandemic, that whether championing an airline at times of perturbation will improve their financial stability post the crisis or whether the benevolence of giving room for the lessee to survive was futile and accordingly should revamp their future as well as present leases.

*4th Year Student, Institute of Law, Nirma University, Ahmedabad

**4th Year Student, Dr. Ram Manohar Lohiya National Law University, Lucknow

[1] Global COVID-19 Airport Status  

[2] Livemint , “Over 20 lakh jobs at risk in Indian aviation, dependent sectors: IATA”

[3]Chambers and Partners, “Aviation Finance & Leasing 2019”, Nitin Sarin, Syed Tamjeed Ahmad, Ritesh Agarwal

[4] Taylor v. Caldwell, [1863] EWHC QB J1

[5] Dentons, “Dentons Aircraft Finance Briefing on COVID-19 related frustration and force majeure issues

[6] Lexology, “Force Majeure in Aviation Contracts”, Winston & Strawn LLP – Ben Bruton, Daniel R. Meagher, Mark Moody and Alison Weal

[7] Lexology, “Navigating the terms of an Aircraft lease agreement amidst the COVID-19 pandemic”, Tay & Partners – Yip Jia Hui and Michelle Pauline Lim

[8] Rhythm Hues, Inc. v. Terminal Marketing Company, Inc., 01 Civ 4697 (DAB) (GWG) (SDNY May 4, 2004).

[9] Olympic Airlines v. ACG, [2013] EWCA Civ 369.

[10] P.3d 746, 750 (Colo. App. 2002

[11] In General Electric Capital Corp. v. F.P.L. Services Corp., 986 F Supp 2d 1029, 1036 (ND Iowa, 2013).

[12] The Hindu,“Will the aviation industry recover from the pandemic?”, Murali N. Krishnaswamy 

[13] CMS Law-Now, “COVID-19 Challenges for the Aircraft Leasing Industry

Op EdsOP. ED.

When the existence of the novel Coronavirus started featuring in the news space following China’s confirmation of its spread in the month of January, 2020, it was considered a novel, elusive actuality. It did not qualify as sufficient cause for concern and alarm which could have potentially sparked much needed preparations. However, in the past three months, the number of confirmed cases and resultant deaths due to Covid-19 (the disease caused by Coronavirus) has risen exponentially across the globe leading the World Health Organisation (WHO) to officially declare the corona virus outbreak as a “pandemic” on 11-3-2020[1].

In such persisting circumstances, the Government of India, in its endeavour to contain the extraordinary outbreak of the Coronavirus and its staggering effects, declared a nationwide lockdown. In the face of the unprecedented situations which have arisen as a result of the complete lockdown, many facets of our system find themselves temporarily inoperative. The disruption of the supply chain is one such inevitable corollary. Given this context, it is likely that performances under many existing contracts will be interrupted, postponed or cancelled. Such state of affairs then throws open many questions viz: Can the present day situation posed by COVID-19 pandemic qualify as “Force Majeure”, whether or not parties to the contracts/agreements can plead for being excused from performing their part of the contract citing force majeure and how will the contracts/agreements wherein, there is no specific force majeure clause would be governed in situation of supervening impossibility etc. This article would attempt to cover answers to all the afore-mentioned questions in light of the existing statutory provisions and the law laid down by the various courts of law in form of case laws.

Meaning of Force Majeure

The concept of force majeure[2] owes its origin to Roman Law which recognised the principle of “clausula rebus sic stantibus” which provides that obligations under a contract are binding so long as the situation existing at the time the contract was entered into fundamentally remains the same. The term force majeure refers to an event or effect that can be neither anticipated nor controlled. To put it differently, any event or circumstance which is within the reasonable control of the contracting parties does not qualify as force majeure. Legally, it is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled[3]. From a contractual perspective, the concept gains significance in as much as it provides protection to contracting parties in cases of virtual and actual impossibility of performance of contract. Hence, where reference is made to force majeure, the intention is to save the performing party from consequences of anything over which he has no control[4].

Force Majeure and Contract Act, 1872

While the provisions contained in the Contract Act, 1872 neither define the term ‘force majeure’ nor do they typically spell out the specific circumstances and events which would qualify as ‘force majeure events’, nevertheless the references to the same may be gathered from certain specific provisions laid therein.

In cases where the contract entered into between the parties contains an express or implied force majeure clause, defining the type of events, such as war, terrorism, earthquakes, hurricanes, acts of government, plagues or epidemics etc., the dissolution of the contract would take place under the terms of the contract itself and such cases would be dealt with under Section 32 of the Contract Act, 1872[5]. A force majeure clause should be construed in each case with a close attention to the words which precede or follow it, and with due regard to the nature and general terms of the contract. The effect of the clause may vary with each instrument[6]. The relevant provision as contained in Section 32 of the Contract Act, 1872 is as follows:

32. Enforcement of Contracts contingent on an event happening.- Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void.

However, when no relevant event is mentioned in a contract, the occurrence of which frustrates the very purpose of the contract, the provision contained in Section 56 of the Act comes into play. Section 56 of the  Contract Act, 1872 embodies the “doctrine of frustration”. Briefly, “frustration” is an English contract law doctrine that acts as a device which serves to dissolve a contract when, as a result of an unforeseen instance, the obligations covered by it are rendered impossible to fulfil or the principal purpose for entering into the contact on the part of either party is fundamentally altered[7]. Generally speaking, the doctrine of frustration as embodied in Section 56 is relied upon for termination of contract. Section 56 of the  Contract Act, 1872 reads as follows:

56. Agreement to do impossible act.- An agreement to do an act impossible in itself is void.

Contract to do act afterwards becoming impossible or unlawful. A contract to do an act which, after the contract made, becomes impossible or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

Compensation for loss through non-performance of act known to be impossible or unlawful. Where one person has promised to do something which he knew or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promise for any loss which such promisee sustains through the non-performance of the promise.

As is manifest from the perusal of the aforementioned provision, the first paragraph of Section 56 provides that an agreement to do an act impossible in itself is voidwhile the second paragraph of the same lays that a contract to do an act becomes void when such an act becomes: (a) impossible; or (b) unlawful by reason of some event which the promisor could not prevent. Under Section 56, the court can proceed to grant relief on the ground of subsequent impossibility when the very foundation of the contract becomes upset by the happening of an unforeseen event which was not anticipated by the parties at the time when the contract was entered into by them[8]. Such event or change must be so fundamental as to be regarded by law as striking at the root of contract as a whole[9]. Therefore, where performance is rendered invalid by intervention of law, or where the subject-matter assumed by the contracting parties to continue to exist is destroyed or a state of thing assumed to be the foundation of the contract fails, or does not happen, or where the performance is to be rendered personally by a person who dies or is disabled, the contract stands discharged[10]. Thus, in a nutshell, it can be said that where there is clear stipulation in the terms of the contract upon which the performance of the contract is dependant, such contracts would be governed by Section 32 of the Contract Act, 1872 and wherever, there is no such stipulation in the contract, such contracts would be governed by Section 56 of the  Contract Act, 1872 in cases a supervening impossibility arises. The said applicability of Section 32 vis-à-vis Section 56 of the Contract Act, 1872 has recently been delved into by the  Supreme Court of India as an ancillary issue in  National Agricultural Cooperative Marketing Federation of India v. Alimenta S.A.[11]

Whether situation posed by COVID-19 pandemic qualifies as Force Majeure event?

In response to the potential ramifications of the Covid-19 pandemic in the functioning of the economic and industrial machinery, notifications and advisories have been issued by the Government of India in an attempt to bring in some semblance of stability.

For instance, on 19-2-2020, the Ministry of Finance, Government of India issued a notification[12] clarifying that the disruption of supply chains due to the spread of coronavirus should be considered as a case of natural calamity and force majeure clause may be invoked, wherever considered appropriate, following due procedures. The aforementioned notification further stipulates that “coronavirus should be considered as a case of natural calamity and force majeure may be invoked, wherever considered appropriate, following the due procedure…a force majeure clause does not excuse a party’s non performance entirely, but only suspends it for the duration of the force majeure. The firm has to give notice of force majeure as soon as it occurs and it cannot be claimed ex-post facto…If the performance in whole or in part or any obligation under the contract is prevented or delayed by any reason of force majeure for a period exceeding ninety days, either party may at its option terminate the contract without any financial repercussion on either side”. However, the aforesaid Office Memorandum may not necessarily or implicitly serve as binding document for the contracting parties, being more in the form of an advisory or recommendation. 

In addition to the above, the question as to whether COVID-19 outbreak along with its consequential restrictions including the quarantines, travel restrictions or other related limitations on normal business imposed by government would qualify as force majeure, would depend on the language of the clause and the rules of legal interpretation of force majeure clauses[13]. Hence, the wordings used in different clauses of the contract assume salience in order to find out as to whether or not parties to the contracts/agreements can plead for being excused from performing their part of the contract citing force majeure given the situation posed by the COVID-19 pandemic. For the aforesaid purpose, further discussion in this article is broadly categorised into two headings — (i) Firstly, cases where force majeure clause is enshrined in the contract itself, and (ii) Secondly, cases where force majeure clause is not enshrined in the contract.

1. If Force Majeure Clause is enshrined in the Contract

Pertinently, if the force majeure clause in the contract refers to a pandemic or an epidemic, the same may be pleaded and urged by contracting parties where performance of the contract entered between them has become practically and commercially impracticable on account of COVID-19 outbreak. Where a contracting party seeks to claim relief under the force majeure clause, the occurrence of one of the events set out in the force majeure clause is needed to be proved and the burden of proof lies on the party which invokes the force majeure clause.

Now, in contracts where the force majeure clause explicitly covers pandemics and epidemics or situations arisen by responses to the pandemic or epidemic, the discharge of the aforementioned burden remains fairly uncomplicated. However, complications arise in a scenario where a force majeure clause simply uses the phrase ‘event beyond the reasonable control of parties’. Here, to facilitate swift and favourable discernment of disputes, it becomes vitally important for the party invoking the force majeure clause to maintain any and all documents related to the event in question which may prove to be consequential in the ascertaining process. In regard to this discussion, the said documents may include (i) any notification and/or guideline issued by the national and/or state governments imposing restrictions on trade, (ii) definite forms of information from reliable media sources related to COVID-19 outbreak, restrictions on public movement and/or mandatory shutdown of modes of travel (iii) documents revealing any cancellations disrupting travel itinerary, such as cancelled/rejected visa et al.

2. If Force Majeure Clause is not enshrined in the Contract

As has been discussed earlier, when an event which is not mentioned in the contract takes place which frustrates the very purpose thereof, the provision contained in Section 56 of the Contract Act, 1872 shall come into play. The  Supreme Court of India, while explaining the concept of frustration in contract law in Satyabrata Ghosh v. Mugneeram Bangur & Amp; Co.[14] has held that the word “impossible” has not been used with respect to physical or literal impossibility. Where an unexpected occurrence or change in circumstances decimates the very objective of the contract the same may be considered as “impossibility” to do as agreed.

A study of the landmark judgments rendered by the  Supreme Court of India over the course of time showcases a very high threshold to apply the concept of force majeure which requires the entire foundation of the contract to be shown to be obliterated. An existing contract shall cease to bind the contracting parties only when consideration of the terms of the contract, in light of the circumstances existing when it was entered into, shows that there was no agreement to be bound in a fundamentally different and unexpected situation. The performance of a contract is never discharged merely on the ground that the same may become onerous to one of the parties[15]. In order elucidate and highlight the threshold defined by the Indian courts for citing force majeure by contracting parties, certain celebrated judgments rendered by the Supreme Court are discussed below:

In Satyabhrata Ghose case (supra), it was held by the Supreme Court of India that the contract of sale for a chunk of land was not frustrated and performance thereunder could not be said to be rendered impossible under Section 56 of the Contract Act, 1872 merely because the said land had been requisitioned by the Government for military purposes during the Second World War. The Supreme Court even went ahead to observe that during the war, the parties could naturally anticipate restrictions of various kinds which would make performance under contracts more difficult than in times of peace and therefore, the requisitioning of the land which formed the subject matter of the contract of sale could not be said to affect the fundamental basis upon which the agreement rested or strike at the roots of the adventure.

Likewise, in Alopi Parshad & Sons Ltd. v. Union of India[16], the claim of the appellant for enhanced prices for supply of ghee for Army personnel during the second world war was rejected by the Supreme Court despite enormous scarcity and enhanced procurement expenses owing to conditions of war and it was categorically held by the court that the parties to an executory contract are often faced with a turn of events which they did not at all anticipate, such as, an abnormal rise or fall in prices, a sudden depreciation of currency etc. However, the same does not per se affect the bargain they have made.

In Naihati Jute Mills Ltd v. Hyaliram Jagannath[17] while observing that it is not hardship or inconvenience or material loss which brings about the principle of frustration into play, the Supreme Court held that rejection of an import licence to a jute supplier sourcing Pakistani jute could not be said to have rendered performance under the contract entered into between the parties as impossible.

More recently, in Energy Watchdog v. Central Electricity Regulatory Commission[18] the rise in price of coal consequent to change in Indonesian Law, which though admittedly rendered the contract commercially impossible, was not treated as a force majeure event by the Supreme Court as neither was the fundamental basis of the contract, which in this case was to generate and supply energy from coal, was shown to be dislodged nor was any frustrating event, except for a rise in the price of coal, pointed out. On the contrary, the Court observed that where alternative modes of performance of obligations under the contract were available, albeit at a higher price, the same could not be treated to have been frustrated.


There is no gainsaying that the behemoth of COVID-19 has inter alia virtually brought economic activity to a halt and has disturbed the chain of production, supply and distribution. However, it would be extremely difficult, if not impossible; to prove beyond reasonable doubt that disruptions qua unprecedented outbreak of COVID-19 pandemic have radically and irreversibly dislodged the very bargain contemplated in a contract, particularly in view of the temporariness of such disruptions or for that matter the full probability of resumption of the “pre-Corona” times. Mere inconveniences, difficulty, pause or delay in performance of obligations under a contract owing to COVID-19 pandemic and its consequential restrictions would not hold ground to treat the same as a force majeure event given the little judicial importance offered by the courts of law to such parameters while defining the high benchmark for force majeure to apply. However, given that the Courts would assess the application of concept of force majeure in light of the facts and circumstances of each case presented before them, by either resorting to principle of equity or by adopting a more technical approach, it would be imperative for the contracting parties be thorough with the terms and clauses incorporated in the contract as well as their contractual rights and obligations thereunder.

*Author is a graduate of University of Cambridge (United Kingdom) with a specialisation in Commercial Laws. Currently practicing law before the Lucknow Bench of Allahabad High Court.

**Co-Author is a gold medallist in law from Unity Post Graduate and Law College Lucknow (affiliated to Lucknow University, Lucknow). Currently practicing law before the Lucknow Bench of  Allahabad High Court.

The authors deeply acknowledge the guidance of Mr. Gaurav Mehrotra, Advocate

[1] See World Health Organisation Virtual Press Conference on Covid-19, 11th March 2020 available at

[2] The term force majeure has been borrowed from French, the literal translation whereof is “superior force” in English.

[3] Black’s Law Dictionary, 11th Edition, at page 788.

[4] Dhanrajamal Gobindram v. Shamji Kalidas & Co., (1961) 3 SCR 1020

[5] Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310

[6] Lebeeaupin v. Crispin, (1920) 2 K.B. 714 

[7] Taylor v. Caldwell , (1863) 3 B & S 826

[8] Naihati Jute Mills Ltd. v. Khyaliram, (1968) 1 SCR 821 

[9] Satyabhrata Ghose v. Mugneeram Bangur, 1954 SCR 310

[10] Raja Dhruv Dev Chand v. Harmohinder Singh, (1968) 3 SCR 339 

[11] 2020 SCC OnLine SC 381  

[12] Office Memorandum No.F. 18/4/2020-PPD titled ‘Force Majeure Clause’, issued by Department of    Expenditure, Procurement Policy Division, Ministry of Finance, Government of India

[13] Mulla & Pollock on Indian Contract Act, 1872 & Specific Relief Act, 1967, page 1181.

[14] 1954 SCR 310 (12) 

[15] Alopi Parshad & Sons Ltd. v. Union of India, 1960 (2) SCR 793

[16] 1960 (2) SCR 793

[17] (1968) 1 SCR 821

[18] (2017) 14 SCC 80


The national lockdown imposed in India due to the coronavirus outbreak has paralysed the economy and had a devastating effect on lives and livelihoods across the country. In light of the crisis, a number of commercial tenants and tenant associations have been seeking complete waivers of rents due to their landlords, and many have resolved not to pay the same. The Doctrine of Frustration/force majeure/Act of God has been invoked by the tenants to justify non-payment of rent. This article shall seek to analyse the Doctrine of Frustration and explore whether such an invocation is permissible in the context of lease agreements, and what may be the consequences thereof.

The Doctrine of Frustration

The Doctrine of Frustration finds place under Section 56 of the Contract Act – which provides that a contract may become void if it becomes impossible to perform due to reasons not preventable by the parties. This “frustration” or discharge of contract occurs immediately at the time of the occurrence of the event, and does not depend upon the whims of the parties to the contract [1] . Section 56 is the statutory provision that enshrines the principles of act of God, force majeure and impossibility in Indian Law for general contracts. The key elements necessary for invoking the doctrine are (a) the occurrence of an event that could not be prevented and (b) the impossibility of performing obligations under the contract due to the occurrence of that event.

The impossibility to perform under Section 56 is not limited to physical or literal impossibility but also includes practical impossibility [2]. However, practical impossibility is not to be read to mean economic unviability or unprofitability. A mere increase in the cost of performing the contract does not frustrate the contract [3]. The rule enshrined under Section 56 of the Contract Act is a positive law, and does not need to be specifically spelt out in a contract [4]. Therefore, even if a contract does not explicitly specify the existence of a force majeure clause, the parties to the contract can still claim frustration of contract for the occurrence of an event beyond their control.

A number of experts trace the doctrine of force majeure back to Section 32 of the Contract Act that deals with the enforcement of contingent contracts. In this author’s opinion, such reliance is misplaced. The doctrine of force majeure (from civil law) is most similar to the Doctrine of Frustration under common law, and both work as an exception to the ordinary rule of absolute liability for contractual obligations. These doctrines come in effect to excuse parties from a contract on occurrence of an “unforeseeable” event. Contingent contracts on the other hand are contracts which come into effect on the occurrence of a foreseeable, yet “uncertain” future event. The mere existence of such a contingent, force majeure clause, does not automatically entitle a party to invoke it, nor does it automatically disentitle a party to seek discharge of obligation by claiming frustration under Section 56.

The determination of rights of the parties will thus depend upon the facts of the individual case and the terms of the contract therein. The Doctrine of Frustration is distinct from a force majeure clause; as most commercial lease agreements in India do not contain a force majeure clause, the scope of this article is limited to the doctrine.

Delving into the History of Frustration

Ironically, it was a case concerning rent arrears in 1647, that eventually resulted in the birth of the Doctrine of Frustration. In Paradine v. Jane (1647) [5], the UK House of Lords – when faced with a dispute concerning a landlord who was denied rent on the grounds that the Royalist forces in the English Civil War had occupied the property and rendered the lessee landless – established a rule of absolute liability for contractual debts. The Court held while deciding in favour of the landlord that, ‘when the party by his own contract creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract.’

In order to soften this rigid rule of construction, the Queens Bench – for the very first time in Taylor v Caldwell in 1863 [6] – carved an exception, and established the doctrine of common law impossibility. When the Contract Act, 1872 came into force 9 years later, this doctrine of impossibility was given statutory force under Section 56. Thus, while the frustration of contract remains a common law exception under English Law, under Indian Law it commands statutory force.

Frustration and Commercial Lease Agreements

The application of the Doctrine of Frustration to lease agreements was discussed as part of the celebrated Cricklewood decision [7], where the House of Lords decided that a 99-year building lease wouldn’t be frustrated and the lessee wouldn’t be discharged from his obligations merely due to a temporary disability in utilising the property. The Court opined that a lease could rarely, if ever, be frustrated, and would require a ‘vast convulsion of nature’. The Courts in England have since held on multiple occasions, that a mere suspension in possessory rights for a period of time does not operate to frustrate the lease or discharge the lessee from his payment obligations[8] .

In India, the Supreme Court in Raja Dhruv Dev Chand v. Raja Harmohinder Singh [9] observed that generally Indian courts were of the view that Section 56 of the Contract Act is not applicable when the rights and obligations of the parties are under a transfer of property. The Court held that the Doctrine of Frustration would not apply to a contract of lease when there was transfer of a property by way of lease under the Indian Law, owing to the transfer of right to enjoy the land as well. If any material part of the property was wholly destroyed or rendered substantially and permanently unfit for the purpose for which it was let out, the Court held that the lessee had the option of avoiding the lease under Section 108(e) of the Transfer of Property Act.

Mulla [10] echoed the findings of the Court, and opined that as far as leases were concerned, there was no scope for the Doctrine of Frustration to apply as the rights and obligations of the parties in such cases are settled (subject to a contract to the contrary) according to the terms of Section 108(e). Thus, it is clear that Section 56 and the Doctrine of Frustration have very limited (if any) applicability to lease agreements. However, the lessees can – in appropriate circumstances – seek protection under Section 108(e) of the Transfer of Property Act.

Can tenants avoid payment of rent due to COVID-19?

The Transfer of Property Act, 1882 – the law that deals with tenancy rights – provides the right to discharge a lease under Section 108(e). The obligations under a lease may be discharged, at the lessee’s option, when:

an unforeseen event destroys either the entire, or material part of the property; or
an unforeseen event that makes the property substantially and permanently unfit for the purpose for which it was let.

Unlike Section 56 which automatically and necessarily terminates the agreement on occurrence of a frustrating event, discharge under Section 108(e) only occurs when the lessee elects to void the lease. The burden to prove the occurrence of either event falls on the lessee, who must establish that either a material part of the property is destroyed or that the property has been rendered ‘substantially and permanently’ unfit for use by the lessee.

If a lessee is able to show that the conditions in Section 108(e) are met, a mere refusal to pay rent is not sufficient for the lessee to avoid his payment obligations. The lessee must notify the lessor of his intent to invoke his option to void the lease in terms of Section 108(e). It is important to bear in mind that relief under Section 108(e) voids the entire agreement, and consequently, a lessee cannot continue to use the property and must forthwith hand over peaceful vacant possession of the property to the lessor. If the lessee fails to hand over the property, he will be liable for rent on (implied) tenancy by holding over [11]. Therefore it goes without saying that once the option under Section 108(e) is validly invoked, the lease comes to an end and the lessee has no right to continue possession of the property. The Madras High Court in Alanduraiappar Koil Chithakkadu v. T.S.A. Hamid [12], rejected a tenant’s claim for remission of rent on account of two cyclones that had caused suspension of his business. The Court held that a temporary suspension of business caused by cyclones in a 5-year lease agreement would not frustrate the contract.

Thus, in the context of the coronavirus outbreak, tenants may not be able to rely on Section 108(e) to justify default on payment of rent. The enforced lockdown does not meet the criteria for invocation of Section 108(e). Neither the lockdown nor the pandemic can be said to have resulted in the destruction of leased property, nor can it be claimed that the lockdown has left the property permanently unfit for use. Furthermore, an enforced suspension of business for a limited period of time cannot be said to have rendered the property substantially unfit for the purpose of the lease.

Even while the pandemic and resultant lockdowns across the world have caused tremendous financial distress and precipitated a steep global recession, revenue losses alone cannot be the grounds for the tenants to avoid their payment obligations. Unless the lease agreement itself provides for a discharge of payment obligations, it may not be possible for a commercial tenant to unilaterally refuse payment of rent. Tenancy being subject to contract, the tenants can always seek waivers of rent or deferrals in payment from the lessors. Only through negotiation and mutual consent therefore, can a tenant be discharged from his obligations under the lease without forcing the tenant to permanently shut shop. Parties looking for a quick solution in the form of a rent default would do well to bear in mind the consequences of being found in breach of contract, a shoddy quick fix may only exacerbate their financial condition.

*Ramchandra Madan is an Advocate, based in New Delhi. He holds a Master in Laws from The London School of Economics & Political Science. He currently practices the law in the courts of Delhi. He can be reached at

[1] Hirji Mulji v. Cheong Yue Steamship Co. Ltd., (1926) AC 497 

[2] Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310 

[3] Tsakiroglou & Co. Ltd. v. Noblee Thorl GmbH, 1962 AC 93 : 1961 (2) All ER 179, Energy Watchdog v. Central Electricity Regulatory Commission, (2017) 14 SCC 80 

[4] Supra Note 2

[5] Paradine v. Jane, [1647] EWHC KB J5

[6] [1863] EWHC QB J1

[7] Cricklewood Property and Investment Trust Ltd. v. Leighton’s Investment Trust Ltd.,[1945] A.C. 221 

[8] Matthey v. Curling (1922) 2 AC 180 (HL) , London & Northern Estates Co. v. Schlesinger (1916) 1 KB 20 , National Carriers Ltd. v. Panalpina,  1981 AC 675 

[9] (1968) 3 SCR 339

[10] Mulla DF, Mulla on Transfer of Property Act (Lexis Nexis 2013)

[11] Damodar  Coal Co. Ltd. v. Harmook Marwari, 1915 SCC OnLine Cal 48 

[12] 1962 SCC OnLine Mad 102 


The Finance Minister while addressing the media on several financial decisions and schemes undertaken by the Government for the benefit of the common masses due to the sudden outbreak of novel COVID-19, which has brought the entire country to a grinding halt, announced that the threshold limit for triggering a Corporate Insolvency Resolution Process under the Insolvency Bankruptcy Code, 2016 (hereinafter referred to as “the Code”) shall stand increased to INR 1 crore.

The Gazette Notification dated 24-03-2020 [MCA Notification S.O. 1205(E)] categorically states that, by virtue of the power conferred by Parliament on the Central Government, vide the proviso to Section 4 of the Insolvency and Bankruptcy Code, 2016, may, by notification, increase the amount of default to a maximum amount of INR 1 crore. However, the said notification does not have any clarification as to the cut-off date with respect to the effective date, or, in the alternative if the notification comes into force immediately then what happens to the pending matters where notices have been issued but the National Company Law Tribunal (“the Adjudicating Authority”) is yet to admit the same. There is lack of clarity with respect to the aforesaid scenario, which will be creating confusion and will result in an ouster of cases which could not have been taken up due to this pandemic. A noble cause will get buried in this act of haste which will result in loss of forum, class-based differential treatment and confusion in the minds of the mass which are all attributes to the test of arbitrariness under Article 14 of the Constitution of India. In this article, we have tried to test the viability of the Notification dated 24-03-2020 as it is and whether the lack of clarification will create more confusion than already existing, which will result in multifarious litigation.

While answering a policy decision, the first question that needs to be addressed is whether there is a power or is a colourable exercise of power or, a case of excessive delegation of powers?

The answer in this case is that, the power of the executive Government to increase the amount of default is beyond question, however, it should be examined on the bedrock and touchstone of reasonability and also whether it satisfies the test of objectivity for the purpose the  executive seeks to achieve through this notification.

For better understanding, Section 4 of the Code is reproduced:


Insolvency Resolution and Liquidation for Corporate Persons


Preliminary & Definitions

4. Application of this Part.— (1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees:

Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one crore rupees.

The proviso to the aforesaid section empowers the executive to increase the threshold limit up to INR 1 crore and the minimum amount for triggering is mentioned as INR 1 lakh.

While testing a policy decision on the anvil of Article 14 of the Constitution needs more scrutiny than otherwise as the scope for judicial review is very limited. We need to apply the settled parameters as laid down by the Supreme Court from time to time starting from Budhan Choudhry v. State of Bihar.[1]

The principles are the following:

  1. The policy decision should not be class based which is strictly forbidden.
  2. It should not be manifestly arbitrary causing confusion and prejudice so as to negate statutory rights as well fundamental rights.
  3. It should satisfy the object and the rationale test.

To understand the purpose of the executive in enacting the aforesaid Notification dated 24.03.2020, one needs to scrutinise the object with the purpose the notification seeks to achieve.

The Government, as an aid to provide boost to the micro, small & medium enterprises industrial sector (hereinafter referred to as the “MSME”) during this period of worldwide lock-down raised the threshold and ordered immediate implementation of the same. However, the intent although shown in the press conference does not find place in the notification, as the notification has raised the threshold limit en bloc irrespective of sectors and category. However, the possible justification which could be inferred from the press conference is that, unless the threshold is increased, the MSME sector might default in payments and the creditors may send the industries into Corporate Insolvency Resolution Process and subsequently into liquidation.

As an illustration, if an MSME industry causes default in payments, then the financial creditor or the operational creditor might drag the company to the National Company Law Tribunal under Section 7 or Section 9 of the Code.

The aforesaid object and reasoning seems plausible, if we look at it with the object to save medium and small-scale industries as they also feature as the backbone of the Indian industrial economy.

On the other hand, while backing the aforesaid object with the rationale; the intention of executive militates against the very object behind framing of the Code which are:

  • The small-scale industries and medium scale, workmen, employees, distributors who basically come within the framework of operational creditors do not have to run from pillar to post to recover their money.
  • Clear demarcation of financial creditors and operational creditors and their stakes along with disbursement procedure.
  • Faster resolution process and time bound court process.
  • Cost-effective.
  • Easy accessibility.

The recent notification, in the absence of any clarification with respect to the date of commencement or the “effective date” and also, with respect to the cases where demand notices have been sent under Section 8 of the Code by an operational creditor, the cases which have been filed but could not be taken up because of this pandemic coupled with the cases which are yet to be admitted.

The notification in the absence of any clarification will be creating problem for the Courts with respect to the application of the same, as going by prior experience, the matters are likely to be shown the door due to lack of pecuniary jurisdiction. It will create a void as well as havoc as to the transition or transfer of those matters.

For example, if a default had arisen in January 2019, it cannot be simply  shown the door under the Code of 2016 by giving the justification of a pandemic in March 2020 by virtue of this notification, as the limitation to trigger insolvency under this Code stays live for a period of 3 years from the date of default[2]. Normally, by applying the canons of statutory interpretation and by invoking Section 6(e) of the General Clauses Act, 1897, all amendments or notifications are prospective unless specified to be retrospective; for which the power must be delegated to the executive by the legislature in the statute itself. However, none of the provisions in the Code, delegate that power to the executive.

When we think about the application of the upgraded threshold limit on the fresh cases which have been filed but could not be taken up due to limited functioning of the Courts and also the cases where defaults range from 2018-till date and the demand notices have been issued, the doors of the National Company Law Tribunal are likely to be shut on their faces because without there being any clarificatory note, the notification has come into application and might impact such pending cases also. Hence, by necessary implication this notification could become retrospective which is not only illegal but also perverse because the Supreme Court in the judgment of S.L. Srinivasa Jute Twine Mills (P) Ltd. v. Union of India[3] while considering a retrospective notification under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 had laid down the following: (SCC p. 746)

“18. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have retrospective operation.(See Keshavan Madhava Memon v. State of Bombay[4]). But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only ‘nova constitutio futuris formam imponere debet, non praeteritis’. In the words of Lord Blanesburgh,

“provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of express enactment or necessary intendment.”

It is an accepted position that this notification is an executive act and not an amendment. Hence, this can be safely termed as a delegated piece of legislation. It is trite in law that a delegated piece of legislation cannot be made to be retrospective by the executive unless and until the statute gives the executive such power[5]. It is an accepted norm since the age of Rai Sahib Ram Jawaya Kapur v. State of Punjab[6] that, the executive can do such acts under a statute as far as permitted and as far as the power of the legislature extends.

Whenever the Government had decided on issues relating to raising the  pecuniary limit or enacting a separate law, which would cause loss of jurisdiction, the executive and the legislature in its wisdom on earlier occasions had taken care of such transition by issuing a clarification or by enacting a provision.

For example, when the Administrative Tribunals Act, 1985 was enacted, cases were transferred to the Central Administrative Tribunals (CAT) vide Section 29 of the Act of 1985. Similar situation and enactment had taken place when the Company Law Board was abolished and the jurisdiction got transferred to the National Company Law Tribunal vide Section 466 of the Companies Act, 2013.

However, there is no such provision in the Insolvency and Bankruptcy Code, 2016. The amendment of March 2020[7] is also silent on this aspect. The notification is also silent on the aspect of pending cases or where demand notices have been issued within the period of limitation prescribed under Section 238-A of the Code, 2016, which is three years.

As a recent example, we would like to cite the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019  dated 28-12-2019 whereby vide Section 3 of the said Ordinance, the criteria for home-buyers for approaching the NCLT under Section 7 of the Code was amended and the criteria was modified to 10% or 100 home-buyers from the same real estate project. The proviso to such an amendment laid down that for pending applications which were yet to be admitted, they must be amended within 30 days.

The said proviso was taking away the right of the people which had already accrued and was made to operative retrospectively by giving a time period of 30 days to amend the petition. Such an exercise of power in the absence of a provision expressly granting such retrospective enactments was prima facie arbitrary and called for a scrutiny by the  Court.

The said provision was challenged by way of a writ petition before the Supreme Court of India, wherein the Supreme Court vide order dated 13-01-2020 was pleased to order status quo with respect to the petitions already filed[8]. The matter is sub judice before the Supreme Court and we shall await the decision of the Supreme Court on this aspect which will be critical to the analysis of delegated powers to the executive under the Code, 2016.

However, despite the pendency of the said writ petition and the Ordinance being subject-matter of challenge, the Government went ahead and passed the aforesaid Ordinance as an Amendment Act on 13.03.2020. The passage of the ordinance as an Amendment Act on 13.03.2020 by retaining the same provision which was stayed by the Supreme Court, nullifies the writ petition pending adjudication and the order of the Supreme Court. However, that is a separate matter to be examined by the Court.

The Notification dated 24.03.2020 does not have such a proviso also as that of the Amendment Act of 2020, which makes things worse, as in both the litigants and the Courts will be clueless with respect to its applicability and the effect it would have on the pending petitions which are yet to be admitted. Hence, on this aspect also, the notification fails to satisfy the test of objectivity.

Thereafter, coming to the question of class-based legislation, the Notification dated 24.03.2020, completely ignores many aspects, namely, as far as the workmen are concerned, they must now rely on the trade unions to initiate or trigger insolvency, but again small trade unions with limited number of members will not be able to match the threshold. The Government by this way has pushed them to the already pre-existing alternative remedy under the Industrial Disputes Act, 1947. On the other hand, if there is no trade union then the option under the Insolvency and Bankruptcy Code, 2016 fizzles out, even though both workmen and employees are covered under the definition of “operational creditors.” However, such remedy does not seem plausible for employees, as they cannot be a part of a trade union under the Trade Unions Act, 1926. Hence, the employees who were in the process to approach the National Company Law Tribunal, now must take the alternate routes, as available under law even though they are time consuming and expensive.

Hence, here also it results in class-based distinction. For example, trade unions having a membership of over 200 will be able to achieve the threshold limit and other unions having a membership of 25 or 50 workmen cannot fulfil the threshold limit. The Trade Unions Act, 1926, however, prescribes the number of workmen required to register a trade union as seven. Hence, by default, there will be a sub-classification within a class; if a trade union is taken to be a class by itself.

Secondly, the small-scale distributors who supply goods, raw materials etc, but suffer from defaults in the hands of debtors, will have to fall back to the civil courts and file recovery suit or summary suit or a suit for specific performance, as the case may be.

The object of the Code to save the Indian economy from the backlash of bad debts and bringing the perpetrators to justice by tightening the noose of insolvency ends with this notification, as it will suit a particular class, which therefore turns out to be manifestly arbitrary.

For example, a small distributor of cotton yarn whose yearly billing with one manufacturer who takes supply of cotton yarn is around INR 20 lakhs, has to wait for 5 years from the date of default to reach the INR 1 crore mark but again will fail under the Limitation Act, 1963 read with Section 238-A of the Code, 2016 which says that the aggrieved must approach the court within 3 years of default, else it becomes time barred.

The Government prior to raising the threshold under the Code, had already issued an Office Memorandum dated 19.02.2020 with a clarificatory Office Memorandum dated 20.03.2020 covering the current situation of the country wide lockdown due to the pandemic under the “force majeure” clause (act of God) of the subsisting contracts.[9] Hence, the default on payments during this time could not have been considered as intentional defaults. The office memorandum could still be clarified further, saying, that the aforesaid force majeure clause shall apply to any transaction with effect from 19.2.2020 for a period of one year.

Neither the notification of increase of threshold under the Code, 2016 nor the office memorandums referred above have a retrospective effect whereby, the rights of the operational as well as the financial creditors which have accrued for the past one year or two years cannot suddenly be shut out by this action, which will result in manifest arbitrariness.

The ungazetted Notification dated 29.03.2020 published by the Insolvency and Bankruptcy Board of India (IBBI) with respect to the third amendment sought to be effected in the Insolvency and Bankruptcy  Board  of  India  (Insolvency  Resolution  Process  for Corporate Persons) Regulations, 2016 vide Clause 40-C, is that, the period of lock-down as notified by the Government will not counted for the purposes of limitation or for the purposes of cause of action/defaults in payment. Therefore, the proposed Clause 40-C should have been enough to tackle the present situation rather than arbitrary action of the Executive by raising the threshold limit for triggering insolvency process, as it clearly says that the present period of lockdown shall not be counted for any purpose including defaults.

On the other hand, Reserve Bank of India, vide press statement dated 27.03.2020 granted a three-month moratorium to all term loans, outstanding as on 01.03.2020 from payment of equated monthly instalments (EMIs), which would cover the working capital loans, cash credit/overdraft loans, housing loans, etc. It has further been clarified that this moratorium will not affect the classification of the assets which are under hypothecation or mortgage.

On the legal aspect, we should examine the aforesaid Notification dated 24.03.2020 on the touchstone of Article 14 and see whether the notification passes the muster for the test of manifest arbitrariness as laid down by the  Supreme Court recently in the judgment of Hindustan Construction Company Ltd. v. Union of India[10]. The test of “manifest arbitrariness” involves a determination as to whether something is done capriciously, irrationally and/or without adequate determining principle by the legislature. Particularly, while applying this doctrine to a piece of legislation, the Court must examine whether that legislation is unfair, unreasonable, discriminatory, non-transparent, capricious, biased with favoritism or nepotism, and not in pursuit of promotion of healthy competition and equitable treatment.

Now, the aforesaid notification of increase of threshold is unreasonable and discriminatory qua financial creditors and operational creditors as financial creditors as a class gets to stay within framework and there is a sub-classification with the class of operational creditors wherein small and medium scale players lose out while on the contrary, the habitual defaulters who are within the definition of small scale industries to medium scale industries stand to benefit. Next, on the issue of equitable treatment, the notification as explained above creates a sub-class within the class of financial as well as operational creditors which the legislature in its wisdom chose not to do.

It is trite in law that there cannot be a sub-class within a class. Operational creditors taken as a class cannot be further segregated on the pre-emption that the defaults below INR 1 crore are suddenly not worth adjudicating under the IBC regime.

While the action of the executive may look fantastic at first brush, the same is definitely not backed up by reasons while the settled law is that class specific legislation is not supported by jurisprudence and we have settled precedents under Article 14 of the Constitution of India.

Further, the Government has issued a press statement specifying that they are contemplating suspension of the operation of Sections 7 to 10 of the Code, 2016 which provide for the mechanism for petitions by the Financial Creditors (Section 7) and by the operational creditors (under Sections 8 and 9 of IBC, 2016). The aforesaid notification of increase of threshold amount has already made the operation of Sections 7 to 9 of IBC, 2016, redundant as it will suit only a handful of big businessman/corporate houses, which fall within the ambit of operational creditors and big financial institutions who fall within the ambit of financial creditors. It will also suit home-buyers who have invested in big projects of worth more than a crore, while the small scale home buyers whose flats are worth INR 40-50 lakhs stand to lose out.

While Section 4 of IBC, 2016 gives the Government a prerogative to issue policy directions, but those policy directions must not be manifestly arbitrary and cannot result in sub-classification which ultimately runs contrary to the object and purpose of the legislature and of the statute itself.[11]

However, the notification for the reasons mentioned above if at all is put to test, in our opinion will have slim chances of getting approved, as it fails to stand on legs and pass the muster of manifest arbitrariness.

Going by the logic of the executive that is to safeguard the small scale and medium scale industries from getting doomed under the present scenario, militates against itself considering the invocation of force majeure clause which includes the present scenario and the moratorium announced by Reserve Bank of India for a period of three months. Therefore, the defaulter of less than INR 1 crore shall stand to benefit from all the three notifications while the small scale/medium scale companies stands to huge pecuniary loss who cannot resort to any remedy for realisation of its debts/losses. The statement issued by RBI  and the force majeure clause would have saved the defaulters for 3-6 months, whereas by this notification, the perpetual defaulters are saved from the rigours of the Insolvency and Bankruptcy Code, 2016 for eternity.


As it is said, an act of haste is not always advisable and good. The proper act of the Government should be to come out with a proper clarification of the notification as to its applicability with a proper provision dealing with pending matters.

In the alternative, the Government can altogether withdraw the notification and issue a notification as indicated by suspending Sections 7 to 10 of IBC, 2016 for a period of 6 months, as it will support the cause as intended by the Government through its Notification dated 19.2.2020 (force majeure) and the press statement issued by Reserve Bank of India on 27.03.2020.

If the aforesaid is not done, in all probability the noble cause might face difficulty if challenged before a court of law.

*This article has been co-authored by Mr Wasim Beg, Partner; L&L Partners Litigation, New Delhi and;

**Mr Swarnendu Chatterjee, Advocate-On-Record, Supreme Court of India and Senior Associate, L&L Partners, Litigation, New Delhi.

[1] (1955) 1 SCR 1045

[2] Section 238-A, Insolvency and Bankruptcy Code, 2016 and the Limitation Act, 1963.

[3] (2006) 2 SCC 740

[4] 1951 SCR 228

[5] Director General of Foreign Trade v. Kanak Exports, (2016) 2 SCC 226

[6] (1955) 2 SCR 225 .

[7] Insolvency and Bankruptcy Code (Amendment) Act, 2020

[8] Manish Kumar v. Union of India, WP (Civil) No. 26 of 2020, order dated 13.01.2020

[9] OM No. 283/18/2020 and OM No. F/18/4/2020-PPD, Ministry of Finance, Department of Expenditure.

[10] 2019 SCC OnLine SC 1520.

[11] Rashbihari Panda v. Union of India, (1969) 1 SCC 414

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The COVID-19 pandemic forced the Central Government on 24-3-2020 to issue a lockdown order under the Disaster Management Act, 2005 imposing a 21-day lockdown of the entire country as a preventive measure to stop the spread of COVID-19 wherein commercial establishments have been directed to be shut.

COVID-19 scenario has also generated a lot of discussion among practitioners and academicians on how will it impact the contracts specifically from the perspective of invoking force majeure clauses under the executed contracts, if there exists a clause to that effect or otherwise whether a party can resort to Section 56 of the Contract Act, 1872 (“the Contract Act”) to invoke frustration.

This article focuses on lease deeds and analyses whether force majeure would be applicable to lease deeds where a force majeure clause has been specified under the lease deed. If there is no force majeure clause specified in the lease deed, whether the parties can invoke validly the doctrine of frustration under the Contract Act or are there any other remedies or scenarios which parties in a lessor-lessee relationship need to bear in mind.


In the event there is a force majeure clause that has been agreed between the lessor and lessee and documented in a lease deed, the invocation of force majeure clause would depend upon the wording and scope and ambit of the definition of a force majeure event.

If the parties have specifically included a pandemic/epidemic, then invocation of force majeure may be easier. However, typically force majeure clauses would provide for act of God and natural calamities but may not specifically provide for a pandemic/epidemic. In such a setup, the invocation of force majeure must be carefully analysed to see whether the force majeure clause can be triggered or not.

On account of the central lockdown for twenty one days, the lessees may be also able to resort to and invoke force majeure on account of the lockdown provided if the lease deed provides for government orders/action preventing the occupation of the premises to be a ground for invocation of force majeure clause. Again, this must be analysed carefully, and lawyer’s advice should be sought ideally before resorting to invocation of force majeure.

Further, one must also analyse the consequences of force majeure as may be specified in the lease deed. Normally, the parties could have provided for suspension of obligations including non-payment of rent for the days when the premises have been rendered unfit for use. In such a scenario, the parties would not have the liberty to invoke termination of the lease deed but suspension of payment obligations under the lease deed for the period the premises were rendered unfit for usage. Also, the clause might provide an additional right to termination in the event the force majeure scenario subsists and continues for an ongoing period. In that eventuality, termination may be exercisable in addition to suspension of obligations under the lease deed only in the event such force majeure persists and not otherwise.

The parties need to be careful before terminating lease deeds as in the event the Court/arbitrator decides that the termination was wrongful then the party who has terminated the lease deed may have to pay damages for wrongful termination.


In the event there is no force majeure clause specified in a contract, then the parties normally resort to the doctrine of frustration which is embodied in Section 56 of the Contract Act to see whether it can be applied to argue that the contract has become impossible to perform. However, the question that arises for consideration is, can the parties resort to such a mechanism for lease deeds.

The Supreme Court was dealing with this issue in Raja Dhruv Dev Chand v. Raja Harmohinder Singh[1] where the Court was called upon to decide on whether Section 56 of the Contract Act is applicable when the rights and obligations of the parties have been enshrined under a lease deed. The three- Judge Bench of the Supreme Court speaking through Shah, J. held that frustration won’t apply to lease deeds. The Court went on to observe as follows: (SCR para 17)

“17. Under a lease of law there is a transfer of right to enjoy that land. If any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purpose for which it was let out, because of fire, tempest, flood, violence of an army or a mob, or other irresistible force, the lease may, at the option of the lessee, be avoided. This rule is incorporated in Section 108(e) of the Transfer of Property Act and applies to leases of land, to which the Transfer of Property Act applies, and the principle thereof to agricultural leases and to leases in areas where, the Transfer of Property Act is not extended. Where the property leased is not destroyed or substantially and permanently unfit, the lessee cannot avoid the lease because he does not or is unable to use the land for purposes for which it is let to him.

(emphasis supplied)

Subsequently, the Supreme Court in Sushila Devi v. Hari Singh[2] followed the principle laid down in Raja Dhruv Dev Chand[3] and went on to hold that Section 56 of the Contract Act only applies to a contract. The Bench of the Supreme Court speaking through Hegde, J. observed as follows: (SCC para 8)

“8….Section 56 applies only to a contract. Once a valid lease comes into existence the agreement to lease disappears and its place is taken by the lease. It becomes a completed conveyance under which the lessee gets an interest in the property. There is a clear distinction between a completed conveyance and an executory contract. Events which discharge a contract do not invalidate a concluded transfer — see Raja Dhruv Dev Chand v. Harmohinder Singh[4]. In view of that decision the view taken by some of the High Courts that Section 56 of the Contract Act applies to leases cannot be accepted as correct.”

(emphasis supplied)


 If the parties have not provided for a force majeure clause in the lease deed, then parties cannot resort to Section 56 of the Contract Act but rather the lessee would have to go by the provisions of the Transfer of Property Act, 1882. Section 108(B)(e) of the Transfer of Property Act, 1882 provides that,

“(e) if by fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void:

Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision;”.

(emphasis supplied)

Accordingly, in the absence of a force majeure clause, a lessee would have to demonstrate and comply with the threshold provided in the Transfer of Property Act which can be argued to be much higher than the threshold set out under the Contract Act.

In the present scenario, it has to be demonstrated by the lessee in the absence of a force majeure clause cumulatively that COVID-19 and/or its consequences would qualify as an irresistible force and that material part of the property has been wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let out.

When there is a force majeure clause documented in the lease deed, the lessee would have to carefully see if it can rightfully invoke it to either suspend payment of rent or to terminate the lease deed or for both depending on what is provided for in the force majeure clause.

Lessors/landlords should also be pragmatic while dealing with requests for rent suspension/ reduction taking into account practical exigencies and circumstances to avoid disputes which can be avoided and amicably resolved between the parties.

*Jeevan Ballav Panda,  Partner, Khaitan and Co.

**Satish Padhi, Senior Associate, Khaitan and Co. (Disclaimer: Views are personal and cannot be attributable to the Firm.)

[1] (1968) 3 SCR 339 .

[2] (1971) 2 SCC 288.

[3] Raja Dhruv Dev Chand v. Raja Harmohinder Singh, (1968) 3 SCR 339 

[4] Ibid.

COVID 19Experts CornerSaakshya Law

[A] Introduction:

A few weeks ago, The Economist carried an article entitled “A force to be reckoned with” in which it highlighted – stemming from the lockdown in China, in general, and around Wuhan, in particular, as a result of the “viral outbreak” as it called it – the worry that the trickle of Chinese enterprises using an “obscure legal manoeuvre” of declaring “force majeure”, would soon turn into a “tidal wave”, enabling such firms to “get out of contracts”. The article went on to describe how, as a result primarily of large-scale disruptions in global supply chains stemming from the negative economic impact of the virus in China, “China Inc is panicking”. The Economist continued:

“Firms are starting to invoke [force majeure] to avoid paying non-performance penalties on contracts. On February 17th, the China Council for the Promotion of International Trade (CCIPT), an official body, revealed that it has already issued over 1,600 “force majeure certificates” to firms in 30 sectors covering contracts worth over $15bn. These [certificates] give official support to [force majeure’s] invocation. More are likely to come.” [1]                                                                                                                                                                                                                                                                        (emphasis supplied)

Whether coincidentally or not, just a couple of days after the CCIPT’s revelation, the Government of India (GoI), through its Ministry of Finance’s Procurement Policy Division – limited as regards GoI’s regime governing the public procurement of goods (i.e. the State’s purchase of goods and services, while undertaking the execution of public works) – seemingly hurried to clarify to all its departments as follows (Office Memorandum No.F.18/4/2020-PPD, dated 19-2-2020):

“A doubt has arisen if the disruption of the supply chains due to spread of corona virus in China or any other country will be covered in the Force Majeure Clause (FMC). In this regard it is clarified that it should be considered as a case of natural calamity and FMC may be invoked, wherever considered appropriate, following due procedure.”                                                                                                                                                                                                                                   (emphasis supplied)

         Since then, in barely five weeks, that “viral outbreak” has become a global pandemic –  COVID-19  – which, in a breath-taking, blink of an eye, looks set to unleash the generation’s, if not the century’s, principal economic destructive force globally, and for which daresay, the world at large was unprepared. And, all in the backdrop – as the International Association for Contract & Commercial Management (IACCM) notes (in its Research Report on the Impact on World Trade, Corona virus: Business Disruption Escalates, 23-3-2020) – of complete uncertainty, as it appears no one can actually and accurately predict what is going to happen; the extent, range, scale and length of time of the damage, especially to the global economy, as a result of COVID-19. And, those are important factors to be borne in mind while considering the extent of the application of the principles of frustration of contracts, as a result of intervening impossibility.

In the midst of all the mayhem in domestic and cross-border economies and markets around the world, as well as the deleterious impact on businesses and commerce in India, in particular, this article focuses its examination on the key question of whether this “obscure legal manoeuvre” (or as IACCM calls it, “little used”) – force majeure – can indeed in some cases, come to the rescue of enterprises wracked by the pummelling effects of the economic downturn brought about by COVID-19.

The answer, as we shall see in this article to that question, is neither as straight forward as GoI would have us believe (as regards public procurement contracts), despite GoI’s seemingly categoric response above; nor indeed, one that will really and entirely work, on which as The Economist rightly notes, “legal opinion is divided”. This article will seek to untangle some of those divisive knots and attempt to seek clarity on the applicability and consequences, under Indian Law, of the concepts and principles of frustration of contracts by reason of impossibility on the one hand, and force majeure clauses, on the other. The conclusion is, as we shall see, a rather narrow and limited framework within which, in India, both principles of contractual frustration by reason of impossibility and force majeure clauses, operate.

[B] Background, Essential Threshold Differences:

Force majeure literally translates from the French as “superior force”. Immediately apparent is its continental roots within the civil law systems of the world – the foundational basis of the principle is one crystallised in the Napoleonic Code in the 1800s, although its origins can be traced to Roman Law. [2]

This is to be contrasted with the Anglo-Saxon common law systems of the world – of which India, the UK (including the Commonwealth) and the USA amongst others, are a part (the fascinating study of the differences between the two systems of law are for another time and place). Suffice it to say that the common law notion with which we are most concerned is the principle of “frustration of contracts” arising from the impossibility of performance of such contracts.

Two important threshold distinctions arising straight away between frustration of contracts by reason of impossibility, on the one hand; and, force majeure clauses, on the other. Firstly, the civil law systems’ concept of force majeure largely consists in the contractual prescription by the parties of such a clause; it being present specifically in their contracts – whereas in common law jurisdictions, including India, the principle of frustration of contracts by reason of impossibility lies as a matter of law beyond a contractual prescription (although the latter force majeure clause may also exist in the contract in dispute, as we shall examine later). Many common law jurisdictions, more used to the rigidity and narrow applicability of their concept of ‘frustration of contracts’ due to impossibility (a critical point discussed in some detail below), are less friendly to claims based on such force majeure contractual clauses, being as they are for instance, “not overly impressed by force majeure certificates” as in China, as The Economist wryly notes.

The second distinction flowing from the first, is clearly how important the governing law of the contract in question is as regards the treatment of any attempt by the affected party or parties to a contract to disclaim such contract – whether by the principle of frustration for reason of impossibility, or the application of a force majeure exception clause in the contract itself. For instance, local Chinese firms, anyways likely to get a “more sympathetic hearing in mainland courts” (The Economist’s words), are also probably far favourably insulated than their Indian counterparts for instance, in these times of COVID-19, since Chinese courts are likely to rule in favour of the Chinese entities when seeing a force majeure certificate, when foreign counterparts of Chinese parties seek enforcement in China of their overseas judgments or arbitral awards – something as examined below, is likely not to be the case in India against Indian enterprises, given the state of the Indian Law in this regard.

If there ever was an opportune time during contractual negotiations to weigh-up the parties’ proper exercise of their freedom to choose the governing law of a contract, rather than give such discussions the usual short shrift (the lawyer’s job alone, as some may say), this is perhaps that time. That said, in some cases, the choice of governing law may effectively be pre-determined on the basis of applying the principles of the proper law of the contract – such as for example, in shareholders’ agreements involving Indian companies – or, the issue transforms itself into one of bringing overseas judgments or arbitral awards into the jurisdiction of the country of the affected party or parties to that contract; and thereby anyways encountering that jurisdiction’s existing treatment of force majeure clauses or principles of frustration of contracts due to impossibility.

One thing though is certain: parties (especially in China given its favourable regime) are using the viral outbreak to try to renegotiate terms under the threat of seeking sanctuary in force majeure exemption clauses – a tactic The Economist describes as “price majeure”. Interestingly, the GoI’s public procurement manual for 2017 (which is the current version applicable) states that “price variation clauses” may be allowed beyond the original scheduled delivery date, by specific alteration of that date through amendments to the contract as a result of force majeure – the GoI’s above mentioned Office Memorandum triggering force majeure in the face of COVID-19 is a step in that direction of re-negotiation, clearly. It appears that the GoI as regards its public procurement regime at least, also wishes to adopt the rather rigid approach of the Chinese in these cases – and, given the expected severity of the impact of COVID-19, one perhaps cannot begrudge GoI in these circumstances. The same approach may be true of, or adopted by, private parties in India.

[C] Essential/Key Principles of Indian Law – Frustration:

Indian Law in this regard, has a quirk of our colonial legal history – an approach arising from the British Colonial State’s eagerness to use India as a testing ground to crystallise in statutory law, principles of common law and thereby the hope of cementing or freezing its contours (crucially, seeking to remove anomalies or grey areas). Unlike in England where the principles relating to what constitutes frustration of contracts as a result of the impossibility of their performance, are subject to the vagaries of judicial pronouncements (and, as a result, can often be notoriously difficult to apply in any given fact situation), Indian law stands crystallised in Section 56 of the Contract Act, 1872 (“the 1872 Act”) – and to that extent ought to be easier of interpretation and application (or at least, capable of crisper definition). However, that said, the one thing common though to both legal systems is that these principles can in their interpretation and application, vary significantly given the facts and circumstances of each matter. As a result, extrapolating the key strands of the applicable principles is essential, as follows:

1. Section 56; first paragraph: An agreement to do an act impossible in itself is void – in other words, if the event or action forming part of the contract is incapable intrinsically of performance at the time of entry into the contract, then that contract is void from the very inception. The 1872 Act itself provides an illustration of this first principle: A agrees with B to discover treasure by magic; the agreement is void.

2. Section 56; second paragraph: A contract to do an act which, after the contract is made: (i) becomes impossible; or (ii) by reason of some event which the promissor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful – in other words, where events have occurred after the making of the contract which constitute an intrusion or occurrence of an unexpected event or change of circumstances which was beyond the control of the parties, the contract may be discharged on the ground of frustration (or, as the 1872 Act says, ‘becomes void when the act becomes impossible or unlawful’). A contract which has become impossible of performance is said to be frustrated.                                                                                                                                                                                                     (emphasis supplied)

A strict reading or interpretation of the wording of this second paragraph of Section 56 of the 1872 Act would seem to suggest that the inability of the party in question to prevent such intervening frustrating circumstance or event would only arise for determination in cases where such intervention has resulted in the act or contract itself becoming unlawful, not when it becomes impossible – the second illustration to the provision is illuminating in this behalf: A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void.

However, the Indian Supreme Court (principally, in Mugneeram Bangur case [3], and several other judgments, such as Raja Dhruv Dev Chand [4], Naihati Jute Mills [5] and Ganga Saran [6]) has construed this provision to include three critical aspects:

(a) Section 56 is a complete or exhaustive code to the extent that the 1872 Act deals with this subject, laying down a positive rule of law; an aspect of what constitutes a permissible discharge of, or an acceptable exception to, the subsequent performance of the contract – as a result, it is not permissible to import the principles of English Law without reference to the statutory provisions in Indian Law, and the Indian courts cannot travel outside the terms of Section 56, including as regards bringing in the concept of whether or not the event under consideration was or was not within the contemplation of the parties at the time of execution of the contract. That said, to the extent of similarities in treatment of these subject-matters between English and Indian Law, the former’s authorities can indeed be very persuasive and relevant guides.

(b) The doctrine in Indian Law is that of “supervening impossibility or illegality”, with the word “impossible” to be taken in its practical, and not in its literal, sense and does not leave the matter to be determined in accordance with the intention of the parties.

(c) The Supreme Court has expounded on a third principle (see also, Pollock & Mulla’s Indian Contract and Specific Relief Acts): when an event of change in circumstances occurs, which is so fundamental as to be regarded by law as striking at the root of the contract, it is the Indian court which can pronounce the contract to be frustrated and at an end. In that regard, the court has to examine the contract; the circumstances under which it was made; and the belief, knowledge and intention of the parties, being evidence of whether the changed circumstances destroyed altogether the basis of the contract and its underlying object – while reaching its conclusion on the basis of the facts and circumstances of each and every such contract, whether the contractual bargain was indeed at an end as a result of the significantly altered conditions.

[D] Application of Principles of Frustration:

The foregoing analysis leads us to the crux of the matter in India: Indian courts a la their English counterparts are reluctant to invoke the doctrine of frustration because they do not want to allow the doctrine to act as an escape route for a party for whom the contract has simply become a bad bargain (a point stressed by the leading English authority on this subject, Prof. Ewan McKendrick, QC, Professor of English Private Law, Oxford University). Courts are anxious to preserve intact the sanctity of the contract, only providing relief when the harshness of the situation becomes so fundamental and apparent in that the performance becomes impossible by causes which could not have been foreseen and which are beyond the control of the parties – establishing such “impossibility” is therefore in most cases, a tall order. The threshold is undeniably high, in the words of the Indian Supreme Court itself (Mugneeram Bangur case [3], AIR 1954 SC 44 at p. 46):

“This much is clear that the word “impossible” has not been used here in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purposes which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor found it impossible to do the act which he promised to do.”

                                                                                                                                                                                                         (emphasis supplied)

Indeed, in none of the Indian cases referred to above, even while drawing out the key principles mentioned above, did the Supreme Court actually permit the contract in question to be regarded as having been or become frustrated by impossibility – in Mugneeram Bangur case [3], for instance, after re-iterating that the test depends or turns on the “effect of what has actually happened on the possibility of performing the contract”, the Supreme Court regarded the total absence of any definite period of time agreed to by the parties within which the work was to be completed (the case involved admittedly, temporary requisition orders passed during war time intervening against the contract), as justifying the ultimate holding that the supervening events did not vitally affect the contract or make its performance impossible.

Further, in Naihati Jute Mills case [5], for instance, the Supreme Court emphasised that a contract is not frustrated merely because the circumstances in which it is made are altered – the courts having no general power to absolve a party from the performance of his or her part of the contract, merely because its performance has become more onerous on account of an unforeseen turn of events. The question in that case was whether the contract which the party claiming frustration had entered into provided that such party would make their best endeavours to get the licence in question; or, whether the contract was that they would indeed obtain such license or else be liable for the breach of that stipulation. The Court on facts found in favour of the latter proposition, and denied frustration, indeed holding that party liable for breach in accordance with the terms of the contract.

Where then does this leave us on the key issue of frustration of contracts by subsequent impossibility? The Indian Law and its principles are undeniably rigid (some would say at a much higher threshold) in terms of its interpretation; and narrow or limited in its applicability. Outcomes in favour of reaching a conclusion of frustration by reason of impossibility need to satisfy a very high threshold in most cases – and turn on a plethora of factors, two of which are relevant for our current purposes. First, the issue of the length of time impacting the reaching of a conclusion of “impossibility” and the second, the extent or range/scope – in other words, the severity – of the intervening “impossibility”. What may in some cases be only a temporary or incomplete bar (for instance, in Mugneeram Bangur case [3]), but which in other instances tend towards either a delay in decision making or an unambiguous conclusion of the impossibility of performance (especially where the parties could not and did not have that supervening circumstance in mind), can result in the finding of “impossibility” within the meaning of Section 56 and the consequent discharge of the parties from that contract. This was the position reached for instance, in DDA v. Kenneth Builders case [7].

Whether COVID-19 is such an intervening event beyond parties’ control that extends to “impossibility” of performance in such circumstances is a moot question, turning largely on facts and circumstances of each case where the deleterious effects of COVID-19 is to be considered on the subject-matter of the contract; but also importantly, on the length of time and the extent or range of its deleterious consequences – all to be viewed from the prism of the legal system’s undeniable preference to hold parties to their bargain.

There is at least one area where such “impossibility” would almost always be a given – and that is in executory contracts, namely, contingent contracts whose performance is dependent on the happening or otherwise of an uncertain future event, which then gets so frustrated. One example is share purchase or subscription agreements, where the completion of the share sale or issuance rests on certain contractually stipulated conditions precedent; the contract being capable potentially of being avoided, if such conditions precedent are not met typically to the satisfaction of the buyer or subscriber as the case may be. A contractually stipulated clause that such “material adverse effects” arising from a COVID-19 like situation can derail such completion, may stand up to the higher threshold of “impossibility” on the basis at least, of a complete vitiation of the very foundation of the contractual bargain.

On the other hand, contracts with a company’s promoters that their non-satisfaction of certain contractually prescribed metrics would result in “significant non-performance” enabling investors to eject them from the executive management of the company in question, may need to satisfy the higher threshold tests of impossibility before being genuinely capable of being triggered in a COVID-19 like situation. This is especially true where the affected party (in such cases the company promoter) may legitimately claim that his or her ability to satisfy the metrics are now materially prejudiced as a result of factors beyond his or her control; although whether those metrics can be said to be unambiguously impossible of achievement (in situations where the severity of the impact can be obviated; or, the length of time of its negative impacts subject to a determinate period visible, or capable of being perceived, on the horizon) are moot questions that may frustrate the very finding of frustration due to “impossibility”.

Another twist in the tale is the legal system’s principle stipulating a duty of mitigation – a non-affected party is under a duty to take all reasonable steps to mitigate any loss consequent upon a breach by the other party. Of course, in order to apply the duty of mitigation, it must first be concluded that the act claimed to be one of frustration is actually “impossibility” masquerading as a breach – which goes back to the fundamental determination: whether the supervening acts constitute an “impossibility” of performance within the three-pronged test described above.

[E] Indian Law & Force Majeure Clauses:

Force majeure clauses come in all shapes and sizes – of what constitutes such force majeure; as well as the contractual consequences thereof. Typically, such a clause defines a set of events that are supervening ones from beyond the contractual sphere of control – for example: acts of God, strikes, lock-outs, fires, war, terrorist attacks (the list can be endless and one can never hope to be exhaustive – in one English case, Channel Island Ferries [8], it covered “disease”), and is typically concluded by generic language seeking to include by reference, any incident or event beyond the control of the relevant affected party or parties.

While such clauses bring about a degree of certainty (as Prof. McKendrick notes), the touchstone remains under Indian Law, the meeting of the test of frustration by “impossibility” as earlier described. Importantly, since the general principle of frustration by reason of “impossibility” operates within very narrow limits (both in terms of the events which constitute frustrating events and the rigour with which discharge from contractual liability arises as a result of such impossibility), force majeure clauses enable parties to contractually provide a wider class of events on which to hang a hook for frustration as a result of such “impossibility” – as Prof. McKendrick notes, while in Davis Contractors case [9], an unexpected increase in prices did not constitute a frustrating event, a commercial contract may state that an “abnormal increase in prices and wages” shall constitute a force majeure event and thereby bring it expressly within the concept of frustration at the threshold at the very least – whether such an event would meet the concept of “impossibility” as legally defined, is of course another matter.

Two important, and sometimes alternative, considerations may be borne in mind, arising from the foregoing discussion – firstly, it is important to bear in mind that the generic language included in a force majeure clause to capture such other incidents or events beyond the control of the relevant affected party, will be limited by the rule of interpretation that stipulates that the subsequent generic words are confined in their scope to the same or similar genus of items as earlier listed (namely, the rule of ejusdem generis – of or as the same kind). The proper drafting of such force majeure clauses is therefore vital – for instance, the use of the generic word “similar” may destroy a more extensive coverage sought to be placed on a force majeure clause. Secondly, and naturally flowing from the first, the approach to be adopted while drafting the language of such force majeure clauses, materially depends on whether the party will be the one most affected by the other party avoiding the contract under principles of frustration by reason of impossibility – in that case, one would want the force majeure clause to be naturally limiting in its definition.

Finally, by providing a force majeure clause the parties have the advantage themselves to make provision for the consequences of the occurrence of such force majeure events leading to contractually defined frustration of the contract. As Prof. McKendrick notes, frustration operates too drastically because it terminates the contract, irrespective of the wishes of the parties – very often the parties may want to continue their relationship but to adapt the terms to meet the new situation (adverted to somewhat earlier as above, while describing ‘price majeure’). As Prof. McKendrick succinctly puts it:

“The remedial rigidity of the doctrine of frustration contrasts unfavourable with the flexibility which can be obtained by drafting an appropriate force majeure clause.”

Oftentimes, the contractually mandated consequences of force majeure clauses are a “stand-still” obligation for a defined period of time, where parties attempt to remedy the deleterious effects of the supervening events, coupled with a subsequent non-recourse, no-liability termination of the contract for convenience – importantly in that latter case, though another principle of Indian contract law appears to be applicable, namely, that where one person has promised to do something which he knew or with reasonable diligence might have known, and which the other party did not know to be impossible, such promissor must compensate that other for any loss which that other sustains as a result of the non-performance of the promise (even in cases of frustration).

In conclusion on this subject, Prof. McKendrick mentions an English case (Super Servant Two [10]) as an interesting and important one because it provides us with an excellent example both of the narrow confines within which the doctrine of frustration operates and of the advantages which can be obtained by the incorporation of a suitably drafted force majeure clause in a contract – a contracting party who wishes to be released from his or her obligations to perform in a wider range of circumstances that may constitute frustrating events, must bargain for the inclusion of a force majeure clause if he or she seeks to benefit from the “narrow confines” of frustration as generally defined.

Interestingly, The Economist asked whether the “viral outbreak” would be covered in typical force majeure clauses; especially, as regards the term “acts of God” – it kept the question open: “does [‘act of God’] really apply to an epidemic probably caused by humans eating exotic animals and to the heavy-handed government response to it?”. The jury we believe is still out on that question as regards whether COVID-19 can be treated as a “natural calamity” or an “act of God” – but greater visibility in India is at hand: seek force majeure clauses properly drafted as to its scope and extent of its applicability, and the consequences that would stem upon it being triggered, especially as regards those matters beyond the control of the parties and which may have a fundamental contract altering effect, so as to have greater certainty that such contracts in such circumstances, may well be regarded as being discharged on the ground of frustration due to impossibility, via the operation of such force majeure clauses.

[E] Conclusion:

Ultimately, the general guiding points in a court deciding on whether to trigger frustration by reason of “impossibility” of performance, whether with or without a force majeure clause, rests on a few important factors (as succinctly described and summarised by the English jurist, P.S. Atiyah, in his An Introduction to the Law of Contract, and worth quoting here in full as there is nothing in Indian Law to show that its provisions run counter to these principles):

(i) a party takes the risk of any changes in circumstances, which affect not the common object of both the parties, but only his or her own purposes in contracting;

(ii) a change in circumstances, which only affects the manner in which one of the parties is to carry out the obligations does not normally frustrate the contract;

(iii) an abnormally large remuneration may indicate that the party receiving it has received it to cover the special risks, for instance, special insurance premiums;

(iv) a party to a contract undertakes the risk that performance of his or her promise may prove more difficult or onerous than expected; or even impossible because of normal changes in circumstances – but he or she may not take that risk of performance proving impossible due to abnormal or extra-ordinary occurrences;

(v) even where a party does not normally take the risk of non-performance, in situations where it is rendered impossible due to abnormal or extra-ordinary circumstances, he or she can be considered to have taken the risk of non-performance if the result of the impossibility is to give him a remedy over or against some other person; and

(vi) as a rough general rule, if the parties make a contract which is only to be performed at some distant future date, one or the other of them will be held to have assumed the risk of performance, whatever the future may bring; the object of such contract may be to eliminate the dangers of later events.

COVID-19 is a game changer in many respects – whether it will upend the prevailing principles of force majeure and frustration of contracts due to “impossibility” remains to be seen. The existing legal provisions and the Indian legal jurisprudence surrounding the same appear robust enough to address the large and wide-ranging legal consequences of the viral pandemic. Whether in particular cases, such consequences will actually lead to parties being able to successfully avoid their obligations, still continues to depend on the time-tested benchmarks of each case – namely, whether the changed circumstances destroyed altogether the basis of the contract and its underlying object, and whether the contractual bargain was indeed at an end as a result of the significantly altered conditions.

That is until the fullness of the COVID-19 disaster unfolds.

*Siddharth Raja, Partner, Saakshya Law. Saakshya Law is a premier, full-service Indian Law Firm headquartered in Bangalore, India ( The author can be reached at

[1]. The Economist, “A force to be reckoned with: Chinese firms use obscure legal tactics to stem virus losses”, dated 22-2-2020.

[2]. See Laurence Lieberman & Abhimanyu Bhandari, “The forgotten Force Majeure clause and its relevance today under Indian and English Law”, Bar & Bench, dated 27-3-2020.

[3]. Satyabrata Ghose v. Mugneeram Bangur & Co., 1954 SCR 310 : AIR 1954 SC 44.

[4]. Raja Dhruv Dev Chand v. Raja Harmohinder Singh, (1968) 3 SCR 339 : AIR 1968 SC 1024.

[5]. Naihati Jute Mills Ltd. v. Khyaliram Jagannath, (1968) 1 SCR 821 : AIR 1968 SC 522.

[6]. Ganga Saran v. Firm Ram Charan Ram Gopal, 1952 SCR 36 : AIR 1952 SC 9.

[7]. DDA v. Kenneth Builders & Developers (P) Ltd., (2016) 13 SCC 561 : AIR 2016 SC 3026.

[8]. Channel Island Ferries Ltd. v. Sealink UK Ltd. [1988] 1 Lloyd’s Rep. 323.

[9]. Davis Contractors Ltd. v. Fareham Urban District Council, [1955] 1 QB 302 : [1955] 2 WLR 388 : [1956] A.C. 696 : [1956] 3 WLR 37.

[10]. J. Lauritzen A.S. v. Wijsmüller B.V., [1990] 1 Lloyd’s Rep. 1.

COVID 19Legislation UpdatesNotifications

Keeping in view Ministry of Finance OM No. 18/4/2020-PPD dt. 19.02.2020 inter alia citing “A force majeure (FM) means extraordinary events or circumstance beyond human control such as an event described as an Act of God (like a natural calamity)” clarifying that spread of corona virus should be considered as a natural calamity and Force Majeure clause may be invoked, Ministry of Railways has decided that the period from 22.03.2020 to 14.04.2020 shall be treated under force majeure and none of the following mentioned charges shall arise for this period:-

1. Demurrage
2. Wharfage
3. Stacking
4. Stabling, Demurrage in case of privately/jointly owned stock
5. Demurrage on parcel traffic
6. Wharfage on parcel traffic
7. Detention Charge in case of container traffic
8. Ground Usage Charge in case of container traffic

Zonal Railways have been advised to coordinate with State Government authorities to ensure logistics support in order to keep up the essential goods transportation.

Earlier on 23rd March 2020, the Railway Board had issued instructions that no haulage charge would be levied for movement of empty containers/empty flat wagons from 24.03.2020 to 30.04.2020.

Ministry of Railways

Press Release dt. 27-03-2020

[Source: PIB]

COVID 19Hot Off The PressNews

Union Ministry of Road Transport & Highways (MoRTH) has advised NHAI to follow MHA guidelines about Toll Plaza Operations  following Lock Down in the wake of COVID-19 epidemic in the country. The Ministry has stated that Clause 4 of annexure to MHA order dated 24.3.2020 says that the commercial and private establishments shall be closed down for a period of 21 days from 25.03.2020.

Union Road Transport & Highways has also advised that NHAI may take action as per the said MHA orders. It added that prevailing condition may be treated as Force Majeure of Concession/Contract Agreement in terms of Ministry of Finance (Dept of Expenditure order dated 19.2.2020.

Ministry of Road Transport & Highways

[Press Release dt. 25-03-2020]

[Source: PIB]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for Electricity (APTEL): A Coram of Justice Manjula Chellur (Chairperson) and S.D. Dubey, (Technical Member) allowed an appeal filed against an impugned order passed by the Central Electricity Regulatory Commission.

The counsel for the appellant Anand K. Ganesan, Swapna Seshadri,  Ashwin Ramanathan and Utkarsh Singh had submitted that in 2011 the transmission system in issue was not required for the Applicant/Appellant in view of the Appellant being unable to obtain the Consent for Establishment (CFE) from the Pollution Control Board. This non-issuance of the CFE was beyond the control of the Applicant/Appellant and therefore a force majeure under the Bulk Power Transmission Agreement was entered into between the parties and further a petition had been filed before the Central Commission seeking directions on the declaration of force majeure and also return on the bank guarantee retained by Powergrid. The Central commission had disposed of the petition holding that the Applicant/Appellant had acted bona fide aggrieved by which the Applicant/Appellant had preferred an appeal which was pending before this tribunal and they further submitted that the delay was not deliberate but on bona fide reasons. 

The Tribunal while allowing the appeal condoned the delay of 148 days and found that the reasoning assigned in the application explaining the delay in filing the Appeal was satisfactory. [PEL Power Ltd. v. CERC, 2019 SCC OnLine APTEL 115, decided on 19-12-2019]

Case BriefsSupreme Court

Supreme Court:  In the issue involving the Power Purchase Agreement (PPA) entered into by the Government and the Adani Enterprises, where the Power Generating Company had pleaded that the rise in price of coal consequent to change in Indonesian law would be a force majeure event which would entitle the respondents to claim compensatory tariff, the bench of P.C. Ghose and R.F. Nariman, JJ held that the change in the Indonesian Law was neither the fundamental basis of the contract dislodged nor was any frustrating event and that alternative modes of performance were available, albeit at a higher price.

The respondents had pleaded before the Appellate Tribunal for Electricity to either discharge them from the performance of the PPA on account of frustration, or to evolve a mechanism to restore the petitioners to the same economic condition prior to occurrence of the change in law as the rise in the price of Indonesian coal, according to them, was unforeseen inasmuch as the PPAs have been entered into sometime in 2006 to 2008, and the rise in price took place only in 2010 and 2011 and that such rise in price was not within their control at all. The Tribunal had granted the relief of compensatory tariff to the respondents.

Setting aside the order of the Tribunal, the Court held that changes in the cost of fuel, or the agreement becoming onerous to perform, are not treated as force majeure events under the PPA itself. Taking note of the clauses of the PPA, the Court said that nowhere do the PPAs state that coal is to be procured only from Indonesia at a particular price. In fact, it is clear on a reading of the PPA as a whole that the price payable for the supply of coal is entirely for the person who sets up the power plant to bear. The fact that the fuel supply agreement has to be appended to the PPA is only to indicate that the raw material for the working of the plant is there and is in order. It was, hence, held that an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took.

Regarding the question as to whether the change in Indonesian Law would amount to change in law, the Court said that the change Indonesian law would not qualify as a change in law under the guidelines read with the PPA, change in Indian law certainly would. Rejecting the contention that a commercial contract is to be interpreted in a manner which gives business efficacy to such contract, that the subject matter of the PPA being “imported coal”, the expression “any law” would refer to laws governing coal that is imported from other countries, the Court said that there are many PPAs entered into with different generators. Some generators may source fuel only from India. Others, as is the case in the Adani Haryana matter, would source fuel to the extent of 70% from India and 30% from abroad, whereas other generators, as in the case of Gujarat Adani and the Coastal case, would source coal wholly from abroad. The meaning of the expression “change in law” under clause 13 of the PPA cannot depend upon whether coal is sourced in a particular PPA from outside India or within India. The meaning will have to remain the same whether coal is sourced wholly in India, partly in India and partly from outside, or wholly from outside.

The Court, hence, directed the Central Electricity Regulatory Commission to go into the matter afresh and determine what relief should be granted to those power generators who fall within clause 13 of the PPA, based on the decision of the Court. [Energy Watchdog v. Central Electricity Regulatory Commission, 2017 SCC OnLine SC 378, decided on 11.04.2017]