On 1st Feb 2021, the High Court of Madras in the case of R.Narayan v. State of Tamil Nadu & Ors comprising of Justice G.R. Swaminathan directs complete waiver of license fee during total lockdown period and call Lockdown as a Force Majeure Event.
Factual Background
The petitioner is an owner of Municipal Shop. He had filed the petition under Article 226 of Constitution of India demanding to issue the writ of mandamus to the respondent to waive off the license fee from the time period of 24.03.2020 to 06.09.2020 and also to decrease and change the charges and to refix the permit fee undertaking the concern that every shopkeeper has suffered a huge loss during the lockdown period of the pandemic of COVID-19.
Response to the complaint:
The government and local bodies said that the contractual obligation to pay the monthly permit fee is absolute and no supervening event can be used for it’s excuse.it further includes that considering the hardships faced by the license owners, issued by the government in order to waive the payment of lease for the period from 1.02.2020 to 31.05.2020.
Petitioner Contentions
The Petitioner in its submissions contends before the Court,
“that he was aware of the contractual obligations of both the parties but alleged that the performance of contract is affected by post contract events, than the situation can be resolved either by the invoking the doctrine of frustration or the principle of force majeure.”
As per section 56 of Indian contract Act,1872 the doctrine of frustration is
“56.Agreement to do impossible act.—An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful.”
Recently the Hon’ble Supreme Court of India has given the jurisprudential aspect of this in South East Asia Marine Engg. & Constructions Ltd. (SEAMEC LTD.) v. Oil India Ltd., reported in (2020) 5 SCC 164. It was held therein as follows : “19…Under Indian contract law, the consequences of a force majeure event are provided for under Section 56 of the Contract Act, which states that on the occurrence of an event which renders the performance impossible, the contract becomes void thereafter.
It is further contended that the consequence of applying the doctrine of frustration is to put ends on the contract but here in case both the parties are continuing the use of premises. The shops were closed only for the time period of lockdown but now the licence owner is occupying the sop and doing his business so the contract is in good shape and the time period of apply the doctrine of frustration has been ruled out.
Issue Raised
The issued raised before the Court,
Whether notwithstanding the stipulation of absolute performance cast on the licensee?
This question is further answered according to the section 51 and section 54 of Indian contract act , 1872. According to them if there are reciprocal promises performed than there is no need for one party to perform it’s promise unless the second has performed it’s promise.
As the shops were closed due to the order of local bodies hence the local bodies cannot demand the permit fee for the time period in which shops were closed.as this is clearly implied in the contract.
Referred case laws:
The Hon’ble Supreme Court in the decision reported in (2004) 3 SCC 214 (Jamshed Hormusji Wadia vs Board Of Trustees, Port Of Mumbai) held that the State and its authorities including instrumentalities of States have to be just, fair and reasonable in all their activities including those in the field of contracts. Even while playing the role of a landlord or a tenant, the State and its authorities remain so and cannot be heard or seen causing displeasure or discomfort to Article 14 of the Constitution of India. A State cannot be seen to be indulging in rack-renting, profiteering and indulging in whimsical or unreasonable evictions or bargains.
In Bharat Petroleum Corpn.Ltd vs. Maddula Ratnavalli [(2007) 6 SCC 81], it was held that where an entity is a State within the meaning of Article 12 of the Constitution of India, it is enjoined with a duty to act fairly and reasonably. 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
Observations by court:
The court holds that the terms of licensee must be interpreted under the scanner of Article 14 of Constitution of India. This sermons to state is unnecessary as the government has recognized the lockdown as force majeure and also issued G.O(D)No.298, Municipal Administration and Water Supply (MA.IV) Department, dated 02.09.2020 directing waiver for a period of two months from 01.04.2020 to 31.05.2020. the petitioner has not challenged the G.O he has challenged the time period that is given in this. It is further contended that the G.O has been issued in the month of June so it can cover only the previous months of lockdown not the upcoming months as no one has predicted how far this lockdown is going.
The respondents chosen to declare the lockdown as force majeure but they have waived the license fee for only two months, but the Vada Seri Bus Stand remained closed from 24.03.2020 to 06.09.2020. the shop owners are allowed to open the shops after 06.09.2020, so they should waive the fee till 06.09.2020 not till 31.05.2020.
Reliefs Granted
From the period of 23.03.2020 to 06.09.2020 the licensee/petitioner is totally relieved from paying any fee and he is entitled to complete waiver. For the period subsequent to 06.09.2020 that is when there was partial relaxation and lifting of lock down restrictions, the petitioner is permitted to move the respondents for relief. And court also asked the authorities to taker a closer look at the ground realties and work according to them.
Case Details
Court: Madras High Court
Case Title: R.Narayan v. State of Tamil Nadu & Ors
Case No: W.P.(MD)No.19596 of 2020 and W.M.P.(MD)Nos.16318 & 16320 of 2020
Date of Judgment: 1.02.2021
Coram: JUSTICE G.R.SWAMINATHAN
Read Judgment @Latestlaws.com
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