The profound impact of the measures being taken by the Government to comprehend the rapid surge and spread of coronavirus COVID-19 is creating multiple issues for almost every sector especially for trades, industries, production units and their workforces. The Government of India has considered this COVID pandemic to be Force Majeure because the situations are beyond control and it is one of the biggest calamities of the world. Ministry of Finance Department of Expenditure Procurement Policy Decision dated 19.2.2020 had issued the office memorandum where the Government of India has considered the term force majeure and the disruption caused due to Corona Virus has been covered in the Force Majeure Clause by the Govt. giving relaxation to the business sectors involved in the process. Similarly, COVID pandemic has also been included under RERA projects in respect for the building, construction and development projects and relaxation has been advised by Housing Ministry. Similarly, the Ministry of Finance vide its notification considered the CORONA Virus crisis as a case of natural calamity would be protected under Force Majeure Clause for the Insolvency and Bankruptcy Proceeding matters. Accordingly, by the help of aforesaid some notifications the Government has provided relaxation for the performance of business activity and process during the pandemic prevailing in India since 19.2.2020.
Ministry of Finance notification dated 19th Feb 2020, addresses this doubt and clarifies that the disruption of supply chains due to the spread of corona virus should be considered as a case of natural calamity and Force Majeure clause may be invoked, wherever considered appropriate, following due procedures. The lockdown impact due to corona pandemic is such that further the Ministry of Finance of Corporate Affairs has also announced that Ministry of Housing and Urban Affairs will issue an advisory to states and urban territories and their regulatory authorities to extend the registration and completion date suo-moto by six months for all registered projects expiring on or after 25th March 2020 without individual applications. Adverse impact due to Covid-19 and projects stand the risk of defaulting on RERA timelines. Timelines need to be extended. Further such guidelines have been issued by the Government to Treat Covid-19 as an event of “Force Majeure” under RERA.
The Government had also issued circular to the effect that if the current situation of lockdown and economic inactivity continues for more than six months, it may consider suspending Section 7, Section 9 and Section 10 of the Insolvency and Bankruptcy Code (IBC), 2016. The said clauses have thus been suspended for one year. This shows how the businesses and industries including each and every sector has been badly affected globally by the pandemic. Further it will not be mandatory for businesses now to pay wages to their workers during the lockdown. The Home Ministry’s guidelines for the fourth phase of lockdown starting Monday has withdrawn the order for such an action. The Ministry of Home Affairs (MHA), Government of India has issued an order providing for certain relaxations and guidelines with respect to the fourth phase of the COVID-19 lockdown, which will be in effect till May 31, 2020. Through the order issued on May 17, the MHA has ceased all its previous orders, including the March 29 order that mandated payment of wages to employees during the lockdown period. Hence now even the Government is considering the fact that all the sectors are facing financial crisis and hence such relaxation is being rendered by the government.
However, in the prevailing COVID 19 pandemics in the country and its rapid outburst which has been witnessed immensely by every sector of the society be it in terms of social, economic, financial, health, organised and unorganized sectors and businesses. In such situation the legislation formulated to render assistance and to safeguard not only rapid transmission of pandemic but also empowering the government and administration to formulate and implement policies and regulations in this effect. In such tough and unforeseen times India has a legislation known as The Epidemic Act 1897 which is more than 120 years old, enacted by the then British Parliament to curb a situation that arose only in one part of undivided India i.e. the Bombay Presidency. The Union Government in the present time has taken the assistance of the this Act to enforce the resistance and implementing its policies. The Act consists of a total four sections, which have been amended time and again as per the requirement. Section 2 of the Act provides with the special provisions for regulations to be imposed by the government at the time of any dangerous epidemic disease. Further Section 2A empowers the Central Government to inspect ships and vessels leaving or arriving in the territories of India and also empowers the government to detain such vessels if required. Likewise, Section 3 of the Act specifically provides with the penalties for disobeying the regulations made by the government under section 2 and 2A. The punishment for such disobedience shall be the same as Section 188 of Indian Penal Code (IPC). Importantly, Section 4 of the Act protects the government and its employees and officers from any prosecution, civil or criminal, for doing anything in good faith. However, it is to be noted that the basic purpose of Epidemic Act is more for preventing and transmission of the disease and it does not provide for curbing and eradicating the disease which already started transmission. Further interestingly the Act does not provide for the definition of epidemic or disease. It is to be noted that the Act merely authorizes the government to recommend provisional notifications and regulations if it thinks that the epidemic cannot be controlled by prevailing statutory laws of nation.
Many state governments have formulated respective ordinances and notifications providing exemptions and relaxations from compliance with certain labour laws. Such relaxations and exemptions have been effectuated to provide more elasticity to Industries and Establishments and to provide assistance to curb the effects of pandemic. The Government of Uttar Pradesh has passed the Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020 wherein exemption have been granted from compliance of majority of the labour laws for a period of three years. Other State Governments also have issued various notifications granting exemptions under the Industrial Disputes Act, 1947, the Factories Act, 1948 and also extended working hours for a period of three (3) months. Similarly, it appears that several other States are also in course for granting exemptions to different sector businesses and establishments under the labour laws. Different Governments objects to recuperate and enhance the business activities and Establishments, however on the same count such relaxations and ordinances are also being criticized on the premise that such relaxations under the labour laws infringe the rights of workers and provide a free hand to employers. However before reaching to a conclusion the application of these regulations and ordinance have to be evaluated.
The Hon’ble Supreme Court of India vide order dated 12 June 2020 in WRIT PETITION (C) DIARY No. 10983 OF 2020 FICUS PAX PRIVATE LTD. & ORS. VERSUS UNION OF INDIA & ORS. wherein various writ petitions have been filed by different employers, employers’ associations questioning the orders issued under Disaster Management Act, 2005 and other consequential orders issued by different States and the Hon’ble Supreme Court has been pleased to consider COVID 19 as a severe pandemic and since many industries, institutions, factories, offices, workplaces whether public or private are closed under lockdown and many of these workplaces would be closed for a further substantive period and are badly affected so it shall not be binding and incumbent upon such employer institutions to pay complete wages to its employees for the period of national lockdown of 54 days.
There are various substantive and complex Economic and Legal concerns also related to corporate governance, disclosure, contracts, financing, strategic transactions, employment, and others surrounding COVID-19 which may be classified as under:
A. Supply Chain: Day by Day this global economic impact is escalating and the establishments are facing tremendous disruptions in supply chains as a result of decrease in consumer demand and challenges in managing staff forces. Trades and Industries which are impacted are looking out to comprehend their statutory rights and obligations, and any relief which may be available to them under such pandemic situation. The evaluations include to classify and negotiate with critical suppliers that are impacted and thereafter forming and implementing a policy to obtain any current and future potential benefits.
B. Contracts: The outbreak of global pandemic has impacted severely on commercial contracts. Establishments, Industries and the businesses are finding it difficult to perform under prevailing commercial contract and hence they are failing to implement the terms and conditions envisaged under the contract. In such circumstances it becomes imperative for the Parties to existing contracts who are directly or indirectly affected with COVID outbreak to assess and evaluate their existing legal rights and obligations, including assessment of the contractual provisions which might be affected in prevailing circumstances. Further the parties would have to identify and abide by any relevant notice requirements as envisaged under prevailing commercial contract or any other statutory law. Furthermore, they have to make efforts to analyze the risks and consequences of any omission or breach under the existing commercial contract and under such eventuality they would have to determine the alternative mechanism for the performance and implementation of the provisions of the contract, to avoid such breach or omission. Further such existing contracts or upcoming contracts may find ways to negotiate in a manner to enhance the supply chain, and in a manner alleviate the adverse impact of supply chain. Further the assessment of contractual options like suspension, termination or force majeure declaration, frustration, etc may also be taken into consideration.
C. Force Majeure: The parties to the existing or prevailing contract or agreement may take recourse towards invoking force majeure clause under contract or agreement on the pretext of non-performance of any or specific provision of contract by one party. In such manner the party may make attempt to obliviate itself from such performance or vice versa. Any such invocation of force majeure must be evaluated within the framework of the agreement and examined under the governing laws. An erroneous invocation of force majeure clause or frustration thereof may result into serious consequences since a party to a contract or agreement cannot avoid its liability for performance merely on the assertion of force majeure and will generally not evade payments under such contract. The basic consequences which ought to be considered is that whether the force majeure event actually made the performance of contract impossible for such party and whether such party has to mitigate such failure of performance by making diligent efforts to derail such failure or delay of performance and in such a way to safeguard the effects of the happening of force majeure event to get minimized or even alleviated. Certain contracts and agreements contemplate the parties in happening of any such event of a material adverse change/effect to the business and it may permit any party to terminate the contract or otherwise avoid its performance thereof.
D. Frustration or Impossibility: If any agreement or contract does not bear force majeure clause, in such eventuality also a party may demonstrate that COVID-19 pandemic and its consequential effects have frustrated the contract and its performance thereof by such party and the performance of terms and conditions embodied in such agreement becomes impossible. Section 56 of the Indian Contract Act 1872 provides for Doctrine of frustration which is based on the concept of impossibility of performance of contract and a party may obliviate itself from such performance where the performance of a contract becomes impossible. However, it would not apply in cases where the performance of such agreement would cause such party to sustain a loss.
E. Employment: Establishments and Industries are under obligation to uphold a safe workplace, and constantly enduring mechanisms to lessen the risks related with the COVID-19 and its transmission. The mechanism to be taken by Establishments or Industries or any Workplaces would vary depending on the type of occupation or business. Further in pursuance to gather social distancing efforts, many establishments are even considering varying the arrangement of conferences towards a virtual conference rather than physical conference. Further it is generally permissible for establishments to restrict business travel of their employees and management for the maximum period. While employers cannot generally restrict personal travel of their employees, it is generally permissible to formulate a policy drawing a condition requiring an employee to self-quarantine upon their return from destinations where there are known cases of COVID-19. Many establishments have started virtual working with their employees and in case virtual working is not possible effective steps have to be taken for compliance of social distancing norms and abiding all government regulations amid COVID 19 pandemic.
F. Data Protection: Various Data protection authorities have initiated the process providing assistance in this regard however there are different opinions regarding the mode and manner in which the companies should make necessary compliance of the policy for data protection. There may be limitations for the establishment to collect and retain all necessary data about the body temperature of their employees or visitors to the workplace or data about health and conceivable COVID-19 symptoms from such employees or visitors. In case the establishment is notified for a case of COVID-19 transmission amongst its employees such establishment may input the complete data comprising of the date and identity of the person suspected of having been transmitted to such virus and the institutional measures which are to be implemented which includes isolation, distant working and report to the relevant health authorities and regular updates to them.
The above mentioned are some economic and legal concerns which must be taken into consideration along with commercial steadiness and flexibility plan so as to safeguard and ensure that establishments and businesses are able to encounter the constant challenges faced due to prevailing pandemic of COVID-19. Though Union as well as State governments have initiated and formulated various policies and measures to render support to various sectors and Establishments during this pandemic time and in furtherance thereof various policies have to be formulated to tackle the upcoming challenges to be faced by many sectors and establishments post COVID crises.
The degree of steps and measure formulated by the administration in pursuance to curb the prevailing pandemic and the means by which these measures are being implemented may differ significantly from Industry to Industry or sector to sector. Further these measures also vary from State to State since policies and measure also vary as formulated by different State Governments. However, the Industries and establishments have to formulate and implement policies and plans to render stability to their business and they have to make efforts to prioritize the wellbeing of their employees and staff.
Many states Governments have issued regulations under the provisions of the Epidemic Act. However it could very well be seen that the states despite enduring restrictions under the Act are still finding it difficult to effectively implement these restrictions and policies and probably it has resulted in haphazard and un-systemize policy for isolation of migrant labours and other people and under the rapid surge of pandemic in the country now we are finding that there are no specific provisions in the Epidemic Act and other statutory legislations under which the Governments Union or State could formulate a better and effective policies and regulation to encounter with this crisis situation. The Act being more than century old, is not enduring effective mechanism in these times. Hence now it becomes imperative for the law makers to enact and enforce the long pending National Health Bill 2009. The National Health Bill 2009 with effective mechanism and formulated policies governing the Health Laws of country is a much required step to be taken by the Government since the prevailing COVID pandemic and its consequential effects in all sectors of society have taught us a lessor that Health the most primary and essential subject to be discussed and envisaged by a regulated law and policy in the nation.
By: Anuuj Taandon Advocate, High Court, Lucknow, Managing Partner STAR LEGALS who may be contacted on email@example.com or firstname.lastname@example.org