Lockdown cannot rescue steel importer from contractual obligations to make payment, distribution of steel an essential service: Bombay HC

The Bombay High Court has ruled that since the lockdown would be for a limited period, it could not come to the rescue of a steel importer so as to enable it to resile from its contractual obligations to make payment. (Standard Retail Pvt. Ltd vs M/s G. S. Global Corp & Ors).The interim order was passed by a single Judge Bench of Justice AA Sayed in a batch of petitions by steel importers (Petitioners) under section 9 of the Arbitration and Conciliation Act..The Petitioners had sought a direction to restrain the Bank from negotiating/encashing the Letters of Credit with respect to the import. .Relying on Section 56 of the Indian Contract Act, 1972, it was the Petitioners’ case that in view of the COVID-19 pandemic and the lockdown declared by the Central/State Government, its contracts with the sellers were terminated as unenforceable on account of frustration, impossibility and impracticability..Under these Contracts the sellers has their head office at South Korea were to supply certain steel products, the shipments of which were to be dispatched from South Korea, to the Petitioners at Mumbai..After hearing the parties and the perusing the relevant clauses of the contract, the Court opined that the Petitioners were not entitled to any ad-interim reliefs..The Court observed that the Letters of Credit were an independent transaction with the Bank and the Bank was not concerned with underlying disputes between the Petitioners and the sellers..It added that the Force Majeure clause in the present contracts was applicable only to the seller and could not come to the aid of the Petitioners who were the buyers..The Court further noted that the contract terms were on Cost and Freight basis (CFR) and the sellers had complied with its obligations and they had performed its part of the contracts and the goods had been already shipped from South Korea..The fact that the Petitioners would not be able to perform its obligations so far as its own purchasers are concerned and/or it would suffer damages, was not a factor which could be considered and held against the sellers, the Court stated..It also noted that the distribution of steel was declared as an essential service and there were no restrictions on its movement. It was recorded that all ports and port related activities including the movement of vehicles and manpower, operations of Container Freight Station and warehouses and offices of Custom Houses Agents had also been declared as essential services..The Court lastly stated, .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 the Respondent No. 1 (sellers) of making payments.Bombay High Court.In the light of the above, the prayer for ad-interim reliefs was rejected..Petitioners were represented by Advovates S B Deshmukh with Uttam Rane.Senior Advocate Vineet Naik with Advocates Mohit Arora, Rajat Taimni and Saket Satapathy, from Tuli and Co. appeared for seller M/s G S Global Corp & Ors. Shardul Amarchand Mangaldas Advocates Ameya Gokhale with Veena Sivaramakrishnan, Vaibhav Singh appeared for seller M/s Hyundai Corporation & Ors. .Bank was represnted by Advocates Akshay Kolse-Patil, Avinav Mukharjee, briefed by Kochhar & Co.