With impositions via Disaster Management Act 2005 almost across the country as a response to managing pandemic, quite a good number of guidelines were issued for public, institutions and organisations under Disaster Management Act.
Present situation is mired with multiple challenges on various fronts including on financial front. At routine level, people are not able to bear their bills on essentials such as including but not limited to the rental obligation. Resulting in, legally speaking, problems at contractual front. The Government has not been able to offer much of a help by providing any cogent relief either by statutory deferring payment obligations or in any other way. This has in a way impacted the commercial transactions and has created a situation which calls for action plan before we actually start witnessing a flood of disputes post pandemic which seems inevitable. How far we can prepare for such situation after pandemic has no straight forward answer and for obvious reasons as pandemic needs all the attention of each one of us at the moment for safety measures. However notwithstanding all this thrust on immediate needs, it does not call for emphasizing the importance also of looking for varied applications of Disaster Management Act on such commercial contracts which are facing challenges due to disturbed livelihood and economic impact of Covid-19 or envisaging supplemental and or additional measures including appropriate legislations.
Supreme Court in Swaraj Abhiyan – (I) v. Union of India (UOI), AIR 2016 SC 2929, held that the DMA is not only to draw up, monitor and implement disaster management plans, but also prevent and mitigate the effects of a disaster.
As far as it has been left to private parties to fairly work-out a solution, the resultant in present may not be very different than failure to even stand by minimum obligations. In such a scenario it will be interesting to see if government can provide some relief to parties in their private commercial arrangements under the provisions of DMA.
In the aforementioned context, Section 72 of DMA may be put to use as it provides for the overriding effect of the Act over any other law. It further adds to the strength by providing non-obstante feature to the entire legislation.
There are rare opportunities and shall be so where we see judicial interpretation of such Acts which certainly facilitate the evolution of legal contours on this aspect of law.
One such case is that of school fee charged by schools. Schools being shut down, entire economic cost that schools incur on physical working has become insignificant resulting into lower cost which naturally asks for cut down in school fees charged by schools. The Apex Court while disposing of Indian School, Jodhpur & Anr. Vs. State of Rajasthan: LL 2021 SC 240, where appeals were filed against orders issued by the Director, Secondary Education of Rajasthan. According to that order, unaided private schools were directed to slam down their annual fees by 30% and 40% for CBSE schools and State Board affiliated schools respectively. The said impugned order was issued in order to give relaxations to the parents keeping in view the reduced overhead expense burden like electricity, maintenance, transportation and other operational costs during the present pandemic situation. But feeling aggrieved of the order of the State Authorities, the Private School Association filed an appeal in the Supreme Court as the respective High Court sustained the order. Apex court found the order erroneous as the said State Authority was not empowered to issue directions to private entities under Disaster Management Act, 2005. The court further observed that “As such, it is not open to the State Government to issue directions in respect of commercial or economic aspects of legitimate subsisting contracts/transactions between two private parties with which the state has no direct connection, in the guise of management of pandemic situation or to provide “mitigation to one” of the two private parties “at the cost of the other”.
It is natural to think that parents are not finding the relief they deserve. Court’s interference at this instance which looks promising, at policy level may do much harm than good by opening Pandora box without dealing with legal aspect end-to-end.
The other view is that of providing relief to parties in a private commercial arrangement by a comprehensive policy framework which may avoid burdening the already over-burdened judicial system and at the same time, provide the much needed relief that suffering people need in their commercial contracts. Government has sufficient reasons and opportunity to invoke its Power judiciously and liberally under section 72 of the Disaster Management Act, 2005 to provide some relief to Private Parties. DMA being special law has an overriding effect over Contract Act and in order to deal with current exigency, Government can form a comprehensive policy with an eye on the private contracts and put DMA on the side of suffering party, may even contemplate amending the Act or laying down a new law for the purpose.
Many countries have similar legislations like DMA to deal with disaster situation. However, the countries have chosen to enact new law to provide certain types of relief in private contracts rather than using Disaster management laws.
Singapore to deal with such a situation has enacted Covid-19 (Temporary Measures) Act which provides for a deferment of contractual obligations, suspension of rental payments for up to six months, and prevents deposits paid from being forfeited, giving parties breathing space to work out a mutually acceptable compromise.
In Germany, Bundestag passed the “Act on Mitigation of the Consequences of the COVID-19 Pandemic in Civil, Insolvency and Criminal Proceedings” (“Act”) as part of the “Corona Package.”
The newly created Article 240 EGBGB provides for number of relief like:
- A right to refuse performance until June 30, 2020, under a contract relating to “material continuing obligations” — according to the explanatory memorandum to the Act, these are continuing obligations that are necessary to cover services of general interest, e.g., compulsory insurance, contracts for the supply of electricity and gas or for telecommunications services — if an obstacle for performance results from COVID-19. (the right to refuse performance in the case of “material continuing obligations,” applies only to consumers and micro-entrepreneurs.)
- A restriction has been imposed on the lessor’s right of termination under rental or lease agreements for land or premises if the tenant/ lessee fails to pay the rent during covid-19 situation or as a result of COVID-19.
The United Kingdom passed a comprehensive legislation, Coronavirus Act, 2020, on 25 March, 2020, which prescribes various emergency protocols, restrictions and limitations on a broad number of subjects. These include a temporary embargo on eviction of tenants of commercial properties for non-payment of rent.
These examples certainly indicate that there is lot that executive/ legislative bodies can do. However, the idea of judicial activism in private contracts is neither a good one for reasons that are obvious enough as not to warrant further mention nor it is possible as it needs comprehensive policy framework to provide relief to private parties without jeopardizing legal sanctity of private contracts which, at all cost should be protected with all sincerity. Government should soon come with policy level solution to provide relief to private parties on performance of their obligations and also minimize the potential risk of private and commercial Disputes in the post-pandemic situation.
Before parting, it would be appropriate to draw attention to the fact that within Contract Act, doctrine of frustration may be put to use which may provide some relief to Private Parties who are left with no other option. Section 56 allows for the doctrine of frustration to be invoked when force majeure comes into play. It states that a contract shall become void if its performance becomes ‘impossible’ as due to lockdown and pandemic guidelines, circumstances no more provide similar opportunities to lakhs as they had in the absence of pandemic.