'Lock Down A Force Majeure Event' : Madras High Court Directs Complete Waiver Of License Fee During Total Lockdown Period

In a notable judgment, the Madras High Court has directed a Municipal Corporation to waive the license fee for running a shop in a bus stand during the entire period of total lockdown from March 24, 2020 to September 6, 2020.

A single bench of Justice G R Swaminathan observed that the benefit of a Government Order issued by the Tamil Nadu Government - which waived license fee for two months(April & May) - should be extended during the period when total lockdwon was in force.

The Court was considering a writ petition filed by on R Narayanan, who was running a shop in the Nagercoil bus stand on a license from the Nagercoil Municipal Corporation, seeking complete waiver of the license fee during the total lockdown period.

The bench observed that although the license agreement did not have an express 'force majeure' clause, the COVID-19 pandemic has to be treated as a 'force majeure' event. Since the local body itself directed the shutting down of the bus stand and the shops, it cannot demand license fee during the period when the shop remained close.

Justice Swaminathan observed in the order :

"The question is whether notwithstanding the stipulation of absolute performance cast on the licensee, this Court would be justified in treating the"lock down" as a force majeure event which will relieve the licensee from performing his obligation to the corresponding extent.

My answer is in the affirmative. Section 51 of the Indian Contract Act, 1872 states that when a contract consists of reciprocal promise to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise. As per Section54, performance cannot be claimed till the other has been performed. The local body must keep the bus stand open and in good repair. The licensee must be permitted to keep the licensed shop open. If the local body had directed the licensee to close down the shop, it cannot demand fee from the licensee for the period when the shop remained closed. Of course, the licensee must be free of any wrong doing. If the licensee is made to suffer for no fault of his by direction to close down the shop, then, the question of payment of fee will notarise. This is clearly an implied term in the contract".

The Court also observed, referring to various Supreme Court precedents,  that a state instrumentality has to abide by the principles of equality and non-arbitrariness as enshrined in Article 14 of the Constitution even in contractual matters with private parties.

"The State acting whether as a landlord or a tenant is required to act bonafide and not arbitrarily, when the same is likely to affect prejudicially the right of others. A statute must be construed justly. An unjust law is no law at all. A statutory order or discretion exercised by a statutory authority must be tested on the anvil of the constitutional scheme. The action on the part of the State must be reasonable even in contractual matters", the bench observed.

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The Court also took a dig at the bureaucracy for passing an order in September to grant only two months waiver of license fee on account of lockdown. The Court noted that the order was issued on the basis of a recommendation made by the Commissioner of Municipal Administration in June 2020 to grant two months waiver. However the recommendation was only acted upon only in September but without considering the fact that the lockdown was further extended.

"It is seen that the said G.O was issued in response to the letter dated 18.06.2020sent by the Commissioner of Municipal Administration. A letter sent in the month of June 2020 will obviously cover only the preceding months of April and May. No one would have anticipated that the lockdown would continue for several more months. Therefore, when the G.O was issued in September, it straightaway accepted the proposal which was confined only to April and May2020. That is how bureaucracy functions. The Secretary to Government did not deem it necessary to go beyond the terms of the request made by the Commissioner of Municipal Administration. But a constitutional court cannot have a blinkered vision. It must take into account the position that prevails on the date when the lis is adjudicated", the Court said.

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The reason for granting waiver for the months of April and May would equally hold good for the entire"total lockdown" period, the Court said.

The Court allowed the writ petition directing complete waiver of license fee from March 24 to September 6, 2020. As regards the subsequent period of partial lockdown, the court permitted the petitioner to approach the authorities for relief.

"This Court believes in the principle of nudging as propounded by Richard H.Thaler. This Court would expect the authorities to take note of the ground realities and respond appropriately", the Court said in conclusion.

Case Details

Title : R Narayanan v The Government of Tamil Nadu

Case No : WP(MD) 19596 of 2020

Bench  : Justice GR Swaminathan

Appearances : Advocate N Dilip Kumar for the petitioner; S Angappan, Government Advocate; P.Athimoolpandian for Municipal Corporation

Click here to read/download the judgment