Bombay High Court Denies Force Majeure Protection to Several Steel Importers
The Bombay High Court has held that the steel importers cannot take the plea of force majeure to restrain the banks from encashing/negotiating Letters of Credit. Several steel importers had contended that their contracts with South Korea based Hyundai Corp and GS Global stood terminated on the ground of frustration of contract and impossibility to perform due to the lockdown. The steel importers moved to the HC seeking an order to restrain the bank Wells Fargo from encashing the Letter of Credit. The Court rejected the plea of the importers on the following grounds:
The contract is between the importers and the sellers, thus, the disputes between the parties doesn’t concern the bank.
The force majeure clause in the contract is applicable only to the South Korean exporters and the importers cannot take advantage of this.
The steel products have already been shipped from South Korea. And the failure of the importers to purchase the goods or that will they suffers damages due to unavailability of purchasers in the market cannot be held against the exporters.
Distribution of steel being on the list of essential services, there is no restriction on its movement and export-import.
Delhi High Court Declares Lockdown Prima Facie in the Nature of Force Majeure
In a temporary relief to the oil services provider, Halliburton Offshore Services, against the mining and natural resources giant, Vedanta, the Delhi High Court has ruled that the lockdown is prima facie in the nature of force majeure.
The High Court restrained Vedanta from invoking eight bank guarantees (BGs) of Halliburton till 11th May. The Order read and we quote “The injunction presently being granted, it is reiterated, is purely ad interim in nature, and is being granted only in view of the completely unpredictable nature of the lockdown, and its sudden imposition on 22nd March, 2020, of which the petitioner could not legitimately be treated as having been aware in advance.”
Halliburton had in April 2018 won the contract for integrated development of Mangala, Bhagyam and Aiswarya oil and gas fields of Vedanta. As part of the contract Halliburton furnished various bank guarantees.
The service provider on 5 December 2019 stated in a communication to Vedanta that it would complete the development of the fields by 31 January 2020. Vedanta claims that the deadline was subsequently extended to 29 February 2020 and finally to 31 March 2020, on Halliburton’s own behest without any approval from them.
Halliburton in a communication, dated 18 March 2020, to Vedanta had invoked Force Majeure, citing Covid-19.
The High Court relied on the principle of “special equities in the form of preventing irretrievable injustice” against invocation of BGs to grant interim relief to Halliburton.