Rajasthan HC Waives Contractual Fees Payable To Panchayat During COVID-19, Says Pandemic Was Beyond Human Control Even Though Not Expressly Mentioned In Contract

Rajasthan High Court has recently allowed a waiver of the recovery to the tune of approximately Rs. 19 lakhs from the highest bidders of a Panchyath contract for faltering in their obligations. This dereliction of the contractual terms occurred during the period of March 2020 to June 2021, when all industrial operations were stopped due to the pandemic.

The single-judge bench of Justice Vinit Kumar Mathur noted in the order that 'situations beyond human control' happen during the currency of a contract. Even if not expressly mentioned in the contract, such scenarios ought to be considered while settling the dispute to ensure equity between the parties, the bench sitting at Jodhpur added.

“…the petitioners were prevented by sufficient means to perform their part of contract for the reasons beyond their control and therefore, if the recovery…is allowed to sustain…then it will create hardship for none of their fault. Even as per Section 56 of the Indian Contract Act, the petitioners were prevented by sufficient reasons and were unable to perform their part of contract on account of impossible situation”, the court observed.

Since the lapses have occurred on the part of the petitioners during 4 separate time periods, Pasund Gram Panchayath has been instructed to recalculate the amount after waiving the amount of recovery for the COVID-19 period. The petitioners should deposit the recalculated amount in instalments to the Gram Panchayath as assessed, the court added.

“The case of the present petitioners is also on the same footing wherein the State Government has provided the benefit to the contractors for recovery of royalty for lifting the river-sand on account of lockdown due to outbreak of COVID 19 pandemic and therefore, this Court feels that on the same principle, the petitioners are also entitled to get the benefit of waiver…”, the court added, after relying on Satyabrata Ghose v. Mugneeram Bangur and Company & Ors., AIR 1954 SC 44.

A recovery notice was issued by the Panchayath on 25.09.2021 directing the petitioners to deposit the aforesaid amount for not carrying out the work as specified in the contract for the removal of marble slurry and for dumping the same at the dump yard. The contract/agreement of the petitioners was terminated by the Panchayath vide order dated 13.03.2020 due to certain issues.

Later, the High Court stayed the effect and operation of the order dated 13.03.2020. Afterwards, when the petitioners were continuing their operations, they weren't able to undertake their contractual obligations for certain periods of time, including the period when the lockdown was in force.

Before Justice Mathur, the counsel for the petitioners vehemently argued that there was no question of lifting and dumping the marble slurry during the lockdown period, and hence, they were unable to perform their end of the contract for no fault of their own.

Concurring with the submissions of the petitioners by invoking the doctrine of 'Force Majeure', Justice Mathur further observed in the order that the outbreak of COVID-19 was an 'Act of God' beyond the control of petitioners. Therefore, the court observed as follows:

“…Merely, because there is no provision in the contractual agreement entered between the parties, if a situation had been created by an act of God which has disabled one of the parties to perform his part of the obligation, then the contingency arising out of the same is required to be taken which may not cause any hardship to one of the parties…”

Citing the above reasons, the writ was partly allowed, and the recovery order dated 25.09.2021 was quashed to the extent of recovery ordered for the period when industrial operations were halted by the pandemic.

For Petitioners: Mr. Sandeep Saruparia

For Respondents: Mr. Falgun Buch for respondent No. 3 & 4

Case Title: Manoj Paliwal & Anr v. State of Rajasthan & Ors.

Case No: S.B. Civil Writ Petition No. 16720/2021

Citation: 2024 LiveLaw (Raj) 60

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