Copper Chimney's Right To Operate From Kala Ghoda Outlet Ended With Expiry of Contract, Can't Invoke Force Majeure: Bombay High Court

Justice GS Kulkarni observed that the termination clause and force majeure clause are independent and invoking force majeure would not change the term of the contract.

“The invocation of force majeure clause namely Article 19 of the agreement and the qualified acceptance of the same by respondent No.1 in its letter dated 9 April 2020 would not amount to any modification or alteration of Article 16 of the contract, whereunder the parties agreed to the term of the agreement to come to an end by efflux of time on 30 September 2022.”

The bench upheld the Civil Court’s order refusing to temporarily restrain the owners of the premises from evicting Copper Chimney.

"The appellant (Copper Chimney) had miserably failed to make out any prima facie case for temporary injunction. The balance of convenience was also overwhelmingly in favour of the respondent, as also considering the substantial price variation the prejudice was being caused to the respondents in the appellant retaining the premises. Thus, the view taken by the learned Trial Judge on all these counts cannot be faulted," said the bench

The Court however, allowed Copper Chimney to continue using the premises till February 20, provided it pays dues of Rs. 12 Lakhs per month owed since October 2022.

The appellant Deluxe Caterers runs the Copper Chimney restaurant in Kalaghoda. The respondents Trade Wings Ltd. and Narayani Hospitality and Academic Institution own the premises of the restaurant. They let out the premises under a Leave and License Agreement to Narayani Associates, who, via a Conducting Agreement, authorized the appellant to run the restaurant there.

The appellant on March 23, 2020, issued a notice to Narayani Associates invoking the force majeure clause saying the agreement is in “suspended animation” due to COVID-19. It requested to be exempted from performing its monetary obligations. Narayani Associates accepted the notice and stated that it will be entitled to terminate the agreement on the 61st day if the appellant continued to not perform its obligations.

On April 24, 2020, Narayani Associates sought payment of dues till March 2020 stating that otherwise the Conducting Agreement will stand terminated from May 23, 2020.

On May 10, 2021, the appellant again sought to be exempted from payments during the lockdown due to second wave of COVID. On May 31, 2022, Narayani Associates issued a notice asking the appellant to vacate the premises by September 30, 2022, as the Conducting Agreement would expire on that date.

The appellant challenged the notice before the Civil Court. It sought a permanent injunction against the respondents to restrain them from evicting it from the premises. It further sought extension of the term of the Conducting Agreement from September 30, 2022, to October 8, 2024. Appellant’s Notice of Motion for temporary relief was dismissed. 

The high court noted that under the force majeure clause in the agreement, the parties agreed that if one of them is unable to perform its obligations under the contract for a period greater than 60 days for reasons beyond its control, then the other party shall be entitled to terminate the contract.

The court noted that the appellant’s invocation of force majeure was not in terms of the force majeure clause i.e., inability to perform obligations of the contract for a period of 60 days. Rather, the appellant canvassed an anticipatory inability in its notice invoking force majeure, the court observed.

The court said that force majeure would at most save the performance of contractual obligations to avoid any liability of damages. However, granting extension of the five-year term of the agreement would amount to substitution of the agreement between the parties with the appellant’s interpretation of the force majeure clause, the court held.

The court said that the termination clause of the Conducting Agreement is independent from the force majeure clause of the contract. Merely because force majeure notice was issued by the appellant does not mean Narayani Associates agreed to extend the term of the contract as well, the court said.

The court held that invocation of force majeure clause by the appellant and the acceptance by Narayani Associates would not amount to any modification or alteration of the termination clause of the contract.

The appellant had no legal right to seek temporary injunction against Narayani Associates as the Conducting Agreement between them had expired its term, the court held. The court said that the rights claimed by the appellant are contractual rights and stood extinguished once the contract came to an end.

Case no. – Appeal from Order No. 944 of 2022

Case Title – Deluxe Caterers Pvt. Ltd. v. M/s. Narayani Associates

Citation: 2023 LiveLaw (Bom) 109