Courts unlikely to interfere on force majeure basis, says Abhishek Singhvi

Declaration of force majeure by companies and individuals to seek rent waivers or delay other payment obligations amid the Covid-19 lockdown is unlikely to be readily accepted by Indian courts, former additional solicitor general and Congress spokesperson Abhishek Singhvi tells Mohit Bhalla. Edited excerpts:
Q. Do you think tenants can seek exemption in court from paying dues by claiming a force majeure event has occurred?
Whatever I am saying is based on 400-year-old English and 70-year-old Indian jurisprudence. It does not claim to be normative (what the law should be). Individual judges may take different positions. Ultimately what prevails are the facts and context of each case, as also contractual language which is supreme. Generally, the temporariness and non-permanence of Covid-19 suggests that courts cannot treat this as a frustrating event, permitting exit from tenancy or waiver of rent.

Q. Is there any legal precedent for application of force majeure that can be used as a test case?
Qua tenants, the law requires the birth of a virtually new contract and the removal of the substratum of the original bargain for force majeure to apply. There is a direct Hong Kong decision in the context of SARS where, applying English law, a very similar claim by a tenant was dismissed in 2003. Hence, it is unlikely that courts will readily interfere on force majeure basis.

Q. Is your advice to amicably negotiate payment obligations?
As a general rule, there is nothing better than mediatory and conciliatory settlement. Never has this been truer than during Covid-19 times. Any litigation, if successful, will yield a final result, if at all, well after Covid-19. And therefore it is much better to act consensually now, as far as possible.

Q. Can corporates wriggle out of contracts to pay raw material suppliers citing force majeure?
As far as raw material suppliers are concerned, my view is closer to the tenancy example above. Subject to individual clauses and contractual language, it would be difficult to suggest that a one month or more lockdown marks a complete break in identity from the original contract and creates a new bargain for the parties.

Q. Can governments impose an obligation on employers to pay wages in the present circumstances?
The Government’s notification under the Disaster Management Act on March 29 does constitute law. However, a challenge can be made both to section 10 and to the notification on the ground that its language does not address the issue of wages at all. Only if such a challenge is finally successful in court can the wages obligation cease. But in the current context of all-round deprivation and destitution, I don’t expect courts to readily intervene.

Q. The government expects the current crisis to lead to more bankruptcies and is contemplating relief such as suspension of the insolvency code for some time. Do you agree with this approach?
It is much better for the government to prevent litigation by firstly suspending invocation of the IBC till a notified date in May or June, part of which they have done. Secondly, they should clarify that the entire period from say 1 february to 15 august should not be looked at from the accounts point of view to calculate the triggering of the IBC code. Thirdly, a similar provision should be made regarding designation something as NPA. This would be the best because if a company is in financial doldrums even after excluding a stipulated period related to COVID, it deserves to go into IBC.