Force majeure to ban on transport of minerals, here're the key court orders

The prohibition of the export of a commodity by the government could be considered as force majeure, according to the Supreme Court
Force majeure pleas in times of Covid-19

Legal consequences of the coronavirus-triggered lockdown have apparently been dealt with differently by high courts, and the Supreme Court is yet to grapple with them in an appeal.  The Delhi High Court last week stayed the encashment of eight bank guarantees because of the “unprecedented” lockdown and called it force majeure (unforeseeable circumstances beyond human control). The interim order was passed in the suit Halliburton Offshore Services vs Vedanta. The latter was restrained from invoking the bank guarantees.  Meanwhile, the Bombay High Court has rejected the force majeure plea of a Mumbai-based company seeking directions restraining a bank from encashing letters of credit in view of the lockdown. In this case, Standard Retail vs GS Global, the former submitted because of the lockdown, its contract with the South Korean supplier of steel was terminated as unenforceable. The high court rejected the argument stating that letters of credit are an independent transaction with the bank and the bank is not concerned with underlying disputes between buyers and sellers. The interim order stated the lockdown would be for a limited period, and could not save the firm from its contractual obligation to make payments.

Govt ban on export amounts to force majeure

The prohibition of the export of a commodity by the government could be considered as force majeure, according to the Supreme Court. It invoked the principle last week for setting aside an international award in the appeal case,  NAFED vs Alimenta. According to the 30-year-old award delivered by the Federation of Oil, Seed and Fat Association, the National Agricultural Cooperative Marketing Federation had to pay $4,681,000 with a 10.5 per cent interest from 1981 to the Swiss firm. The Supreme Court, while overruling the Delhi High Court, stated the contract to export groundnut itself was against basic law and public policy. Besides, the contract was so unfair that the government rightly declined permission to export the commodity. The supply could not have been made without the permission of the government.  It could not be supplied because of force majeure, the judgment said.

Ban on transport of minerals quashed 

More than 25 mining firms in Rajasthan won their case when the high court quashed two state government notifications imposing an absolute restriction on the transportation of minor minerals outside the state. The notifications were issued under the Rajasthan Minor Mineral Concession Rules, purportedly to protect domestic industries and in the public interest. The prohibition would have last up to three years in some cases. Allowing the appeals, led by Surana Minerals vs State, the high court ruled the notification violated the freedom of trade between states. It stated such power could be exercised so as to regulate the transportation of minor minerals and only for the purposes of preventing illegal mining, trans-portation and storage. Referring to the Mines and Minerals Regulation Act, the court said the power of the government to make rules did not go beyond regulating the grant of quarry leases, mining leases, and other minor mineral concessions.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel