As per World Health Organisation, Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus. Older people, and those with underlying medical problems like cardiovascular disease, diabetes, chronic respiratory disease, and cancer are more likely to develop serious illness. It is pertinent to note that in present situation of spread of coronavirus disease, lot of commercial legal disputes are expected to arrive in future era, therefore it is important to study laws relevant and related to present situation. The Government of India and State Governments has passed various notifications, orders and regulations for effective implementation of preventative measures which as follows: 1) Self Imposed Curfew on 22.03.2020, It is pertinent to note that it is self imposed in nature meaning thereby No Official Notification and Order 2) Limited Lockdown whereby various Notifications and Regulations were passed under Epidemic Disease Act by respective State Governments for instance The Government of NCT of Delhi issued Delhi Epidemic Diseases Covid 19 Regulations 2020 and 3) National Lockdown via Ministry of Home Affairs order dated 24.03.2020 operational for a period of 21 days. 

COVID 19 situation is covered within the ambit of “Force Majeure”. “Force Majeure”  and “Act of God” should not be used interchangeably. The Act of God includes all inevitable accidents caused by nature and which are not connected with human agency whereas Force Majeure is a broader concept where the accident is not necessarily connected with nature and can be connected to human agency. Almost all commercial contracts have an express or implied Force Majeure clause. The Force Majeure concept is recognised by section 56 of Indian Contract Act in the form of Doctrine of Frustration. 

Expected Legal Disputes 

By way of this article, I am focusing on the legal aspects of the disputes which are expected to arise in the Indian Real Estate Industry.

Lessor Lessee Disputes 

As per section 105 of Transfer of Property Act 1882, Lease is a transfer of right to enjoy an immovable property for a certain time in consideration of price paid or promised to be paid. In present scenario where most of the commercial establishments operate on rented premises and are closed in compliance of MOH order dated 24.03.2020 with few exceptions, the disputes which is most likely to arise is non payment of agreed Rentals by the Lessee. The other disputes which are expected to arise are Unlawful and forced eviction of tenants, Non Maintenance and Deterioration of the rented premises due to prolonged closure of operations, Non payment of statutory dues of minimum electricity and water bills by the tenant and Delayed delivery of possession by the Developers.

Lessee Legal Perspective 

As per section 4 of Epidemic Diseases Act read with section 75 of Disaster Management Act, 2005 no legal proceedings can be initiated against a person for anything done in compliance of the provisions of the Act. Therefore meaning thereby the tenant is immune to legal proceedings initiated by the landlord for recovery of rent arrears accrued for the period of lockdown.

 Another problem faced by tenants is unlawful and forced eviction by the landlords due to suspicion of corona virus disease infection. This problem is commonly faced by the Doctors, Paramedical Staff and Health care personnel. As per Government of NCT of Delhi, Health and Family welfare Department order dated 24.03.2020, such behaviour of landlord amounts to obstructing public servant in discharging their duties and punishable under section 188 of Indian Penal Code. 

Lessor Legal Perspective

The major problem faced by the Landlords is that Tenants are trying to unlawfully escape from their contractual obligation of operating lease for agreed lease term on the grounds of Forced Majeure. However the tenant can claim waiver of payment of rental dues only for the period of lockdown and cannot escape from their contractual liability of paying agreed rental on timely basis after resuming operations. Tenants are bound to abide the lock In Period if incorporated in their lease agreement and cannot terminate the lease agreement before completion of lock In Period and without service of contractual notice of termination.

Developer Legal Perspective

The developers are seeking extension of committed timelines for construction of realty projects. As per Maharashtra RERA order dated 02.04.2020 bearing no 13/2020, For all Maha RERA registered projects where completion date, revised completion date or extended completion date expires on or after 15 March 2020, the period of validity for registration of such projects shall be extended by 3 months. Further the time limits of all statutory compliances in accordance with the Real Estate (Regulation and Development) Act, 2016 and Rules & Regulations made there under which were due in March/April/May are extended to 30 June 2020. The said Maha RERA order is applicable to realty projects based in the state of Maharashtra only. However other Real Estate Regulatory Authorities are also expected to issue similar orders in coming days.

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Harshit Goyal is the founder of Harshit Goyal Law Offices and a member of the Supreme Court Bar Association . Mr. Goyal has expertise in Real Estate and Business Laws. He is also the founder of Legal Companion NGO (A Pro Bono Legal Initiative). Mr. Goyal has received a Certificate of Appreciation by Dr. Kiran Bedi.  

Damages are basically compensation payable to aggrieved person/party for breach of contract by other person/party and loss suffered thereby.

In commercial arena, there are numerous contracts which contain provisions for compensation and/or damages and/or penalty payable for breach of Contract.

Under Indian Law, in particular under Indian Contract Act, 1882 (Contract Act) penalty in not recoverable and hence clauses drafted in the nature of penalty are redundant.

With respect to compensation or what is popularly known as “Damages”, the same may be quantified or unquantified. Hence there are two kinds of Damages:-

THE ESSENTIAL CONDITIONS TO BE SATISFIED FOR AWARD OF DAMAGES:-

IMPORTANT LEGAL PRINCIPLES:-

*In case of liquidated damages, the court in no circumstances award amount bigger than amount specified in contract.

*Even if there is breach of contract but no loss is suffered by party, no damages can be awarded by Courts.

*If party aggrieved does not take reasonable steps to mitigate losses, then such party is not entitled to damages to the extent loss suffered due to such neglect.

MYTHS ABOUT DAMAGES UNMASKED:-

* The same is irrespective of the clauses of the contract as no contract can override the provisions of law.

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Devul Dighe is a practising advocate appearing for Resolution Professionals and other Professionals in National Company Law Tribunals. Mr. Dighe also handles Insolvency Applications apart from other property, consumer, testamentary, trust matters and other commercial litigation matters. Mr. Dighe obtained his LLB as well as his LLM degree from University of Mumbai. You can reach him at advdevul@gmail.com.

Covid-19 crisis has severely impacted almost all industries but disruptions in the airline industry is so profound that it is assumed to be greater than the combined crises of 9/11 and the 2008 global financial put together. The Government of India (acting through DGCA) (“GoI”) has vide its (i) order dated March 23, 2020 passed under Section 88(1) of the Aircraft Act, 1934; and (ii) orders dated March 26, 2020 and April 14, 2020 directed inter alia all aircraft operators to suspend the operations of all the domestic flights and all scheduled international commercial passenger services until May 3, 2020. The forward air travel bookings are far outweighed by the cancellations. Air travel demand is drying up in ways that are unprecedented with no semblance of normalcy on the horizon. For an industry which is already stressed, Covid-19 has only accelerated the process of bankruptcy filing by several companies (like Virgin Australia and Air Mauritius). Those airline companies which are still in business have also suffered misfortunes as coronavirus-forced lockdowns have kept their fleets grounded. Per the market sources, apart from the pay cut, several airline companies (Indigo, Go Airlines) have also taken other cost cutting measures including furloughs.

Given the turbulence caused due to the outbreak of Covid-19, it is crucial for the airline industry to focus on the horizon to successfully navigate the challenges (including legal, financial and operational) which are likely to surface once the pandemic is behind us. Future flight plan for the airlines will be influenced to a great extent by factors such as avoiding countries that have been virus epicentres and gauging government responses on the type and duration of travel restrictions and the conditions under which they might be relaxed.[1] It is likely that governments across the globe may consider imposing specific restrictions/limitations (akin to the security measures put in place after terrorism events[2]) for inbound and outbound passengers. These restrictions/ limitations may include a mandatory health screenings or certificates (form prescribed medical practitioners) prior to the boarding. In this article we analyse and identify various operational challenges and legal issues which may arise because of the nationwide shutdown and explore mitigants, if any.

The most critical question today vis-à-vis Covid-19 concerns the duration of the crisis in light of government responses and the progression of the virus. For the aviation industry, besides lifting of the current lock-down, relaxation on the ban of air travel both within and outside India should also be considered. Nevertheless, the duration of Covid-19 crisis is likely to differ by region and by country. International Air Transport Association has identified India amongst the priority countries that need to take action for relieving the already struggling airline companies from the stress caused due to the pandemic. There are several industries including Travel and Tourism which are heavily dependent on the aviation industry and jobs across many sectors will be impacted if airlines do not survive the Covid-19 crisis.

Post Covid, megatrends such as the dramatic rise in remote working, government or organisation-imposed limitations/restrictions on air travel, greater reliance on locally-oriented supply chains as well as avoiding non-essential travels will impact the recovery demand in the aviation industry and may lead to major overhaul in the management and operation of the airline industry.

In order to fly safely through this turbulent time, it is of utmost importance that the airline companies launch a crisis management team or as it being coined by some in the industry – “Plan Ahead Team”. This Plan Ahead Team will be responsible for collecting forward looking intelligence and provide a Post Covid-19 flight plan to guide and accelerate decision making. Following are some of the of the challenges/considerations which airline companies in India may consider while formulating their Post Covid-19 flight plan:

A. Third party contractor agreements/Hedging arrangement for jet fuel prices: Determination of the optimal size and dimensions of their networks and fleet will hold the key to the survival of airline companies. These companies may have to revamp their strategies vis-à-vis the air travel restrictions imposed by the governments to identify routes that are most likely to recover basis demand, regulatory and market structure scenarios. The determination of routes that are most likely to recover will determine which fleet/route to recommission. For the routes that could not be recommissioned or are partially commissioned post Covid-19 and withdrawal of lockdown orders , the airline companies may have to renegotiate/re-assess the legal risk that may arise pursuant to their contracts with third party contractors engaged for inter alia refueling; catering; runway/taxiway construction and repair; aircraft maintenance and overhaul; crew training; and flight dispatch. Further, airline companies must also consider revisiting/re-negotiating their existing contracts for hedging the jet fuel prices. Most of the airline are locked into contracts for hedging the jet fuel prices. There has been a steep drop in the prices of jet fuel as an upshot of the current crisis. Accordingly, the airline companies will have to pay their higher hedged amount for jet fuel, creating hedging loses. In this context, the existing provisions of these contracts become relevant to determine the leverage of discussions from a legal rights perspective.

B. Financing Arrangements: Given that the airline companies have suspended all their business, it would imperative to ascertain if defaults would get triggered under the various financing agreements entered by the airline companies. Where an event of default is only triggered upon a ‘voluntary’ suspension of business, it may be argued that such temporary cessation of business due to the virus outbreak is a direct consequence of the government regulations and therefore outside the scope of such provision. Further, it would be relevant to check if an event of default is qualified by a requirement that a suspension of business has a “material adverse effect” on the borrower’s ability to perform its contractual obligations. If there is a significant impact on the borrower’s ability to pay, this will likely satisfy the test of ‘material adverse effect. Additionally, it is expected that post-Covid-19 and lifting of the lockdown orders, for reasons including financial and operational difficulties, the airline companies may not be able to commence operations in all the sectors or may not be in a position to recommission their entire fleet. Given the aforesaid, it would be relevant for airline companies to review the event of default provision relating to ‘cessation of business’ in their financing agreements. Cessation of Business would typically include events where a company ‘threatens’ to suspend or cease to carry on its business and therefore, one may argue that such temporary closures post Covid-19 and/or lifting of lockdown orders, would constitute a ‘cessation’ of business. It would be prudent for airline companies to review their facility agreements when contemplating Covid-19 related measures and consider the impact of such measures may have on their financing arrangements. These tests can be carried out during the period of lockdown, such that the provisions can be re-considered by the parties.

C. Aircraft Lease Agreements: The airline companies may have to revisit/review their aircraft lease agreements. The airline companies may consider approaching the lessors for seeking concessions in relation to the lease obligations including ‘rental holiday’ on account of liquidity crunch consequent to fall in ticket receipts post Covid-19. While the lessors may be entitled to decline requests for concessions on lease obligations, the commercial reality may well be that lessors will have to assess whether supporting an airline in some way may improve their financial health in the aftermath of the crisis or whether such benevolence will only delay the end of a business that was struggling in any case. It may be worthwhile to consider that the relief package/concessions which an airline company may seek from the lessors may include inter alia a standstill for an agreed period with an agreed repayment schedule to recapture the unpaid rents, forbearance on event of default at a cost.

D. Governmental Support: Globally, the market structure for airline industry is set to witness a major revamp. This change will be significantly influenced by government responses to the crisis and types and levels of support extended to the airline industry. For instance, several European countries have announced support for airline employees as a panacea to the airline companies for drastically reducing their employee costs. The United States is offering a rescue package for all carriers that comprises a mix of payroll grants and loans. Similar support has been extended or is likely to be extended (to the employees directly or to airline companies) in the Middle East and some Asian countries. In the absence of specific announcements/ relief measures, the airline companies in India may consider approaching the Ministry of Civil Aviation and/or the GoI for relaxation/waiver in relation to various fees/licenses including airport charges, AAI and Private Airport Operators’ space rentals and infrastructure charges which are to be paid by them. This waiver may specifically be sought in relation to air spaces/sectors, which the airline companies suspect will not be recommissioned or sectors where the travel demand likely to rebound slowly.

E. Resolution/Restructuring: Globally there are several airline companies which have filed for bankruptcy. Per CAPA-Centre of Aviation,  most world airlines would be bankrupt by the end of May. In this context, the Ministry of Finance (“MoF”) has on March 24, 2020, indicated that if Covid-19 crisis continues beyond April 30, 2020, it may consider suspending Section 7, 9 and 10 of the Insolvency and Bankruptcy Code, 2016 for a period of six months to stop companies from being forced into insolvency proceedings in such force majeure causes of default under the commercial agreements (e.g. financing agreements, lease agreements). Additionally, RBI has issued several circulars dealing with the measures to alleviate the Covid -19 impact on corporate India. With this background, the airline companies may consider engaging in dialogues with their creditors/lenders for preparing and implementing a resolution/revival plans which may involve sale or purchase of minority equity stakes, merger and other consolidation opportunities for resolving the financial crisis and liquidity crunch.

F. Import Duties and Trade barriers: Government of India is considering putting in place several trade restrictions/embargo on the import of goods from China. The airline companies in India import spare parts including generator control units for their inventory from China. The prices of these spare parts may be increased due to the embargo/trade restrictions imposed by the Government of India.

As Covid -19 continues to spread across the globe, the challenges triggered by it are numerous and unprecedented. In order to successfully navigate through this challenging and uncertain environment, a thoroughly crafted and a comprehensive flight plan will be pivotal. The dramatic reduction in passenger numbers represents a threat to the solvency of the airline companies. The airline companies may consider restructuring their business and debt. However, it would imperative that any such restructurings (business or debt) will have to be agreed and implemented relatively quickly, in order to avoid collapses. It may be worthwhile to note that in stressed situations like Covid-19, being on the fastest trajectory may matter more than having a great plan that may quickly become outdated. Therefore, after the pandemic is contained, GoI may have to provide a relief package for the aviation industry to support economic recovery and prevent collapse of the aviation industry.

The Indian tourism and hospitality industry are severely affected by the outbreak of COVID-19. Once COVID-19 crisis is contained, the GoI may inter alia consider developing an appropriate messaging/advertising campaign (similar to ‘Incredible India’ tourism campaign) so as to provide necessary impetus to the recovery of the aviation industry post COVID-19.

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The article was first published in Cyril Amarchand Mangaldas corporate blog: www.cyrilamarchandblogs.com

Subhojit Sadhu is Partner in the Projects and Project Finance practice at the Mumbai office of Cyril Amarchand Mangaldas, Subhojit has a wide range of experience in banking, projects, project financing, structured financing and debt restructuring across various sectors including Solar, Wind, Road, Thermal, Oil & Gas, Transmission, Real Estate, Ports, Hydro, Warehousing, Aviation, Automobile. He can be reached at subhojit.sadhu@cyrilshroff.com

Shrey Srivastava is an Associate in the Project and Project Financing Practice at the Delhi office of Cyril Amarchand Mangaldas. Shrey advises on aspects relating to debt restructuring, project financing, security enforcement, structured finance, recovery of loans and banking-related matters. Shrey can be reached at shrey.srivastava@cyrilshroff.com

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[1] The Government of India had vide its circular dated April 14, 2020 has decided that all scheduled international commercial passenger services shall remain closed until May 3, 2020. Additionally, a collated list of the Global and regional Government measures related to Covid-19 are available at https://www.iata.org/en/programs/safety/health/diseases/government-measures-related-to-coronavirus/

[2] Post 9/11, it is customary to have long lines at the airport and extensive security checks. The enhanced security measures are being monitored and implemented by the Transportation Security Administration (TSA). The TSA was created as a direct result of the 9/11 attacks. Available at https://www.insider.com/world-changed-after-september-11-2018-9#2-airport-security-has-gotten-a-lot-stricter-2 and https://www.dhs.gov/preventing-terrorism-and-enhancing-security.

Section 29A of the Arbitration & Conciliation Act, 1996 was amended vide Arbitration & Conciliation (Amendment) Act, 2015 w.e.f. 23.10.2015 to set “Time Limit for arbitral award” wherein it was stated that an award shall be rendered within twelve months from the date the arbitral tribunal enters upon reference i.e. when the arbitrator/s receives their notice of appointment.

The Section also allowed a period of extension for six months however, if the award was not rendered within such period, the parties can apply for further extension establishing sufficient cause of the mandate of the Tribunal shall be terminated.

Thereafter, the Arbitration & Conciliation (Amendment) Act, 2019 further amended Section 29A of the Arbitration & Conciliation Act, 1996. The same was enforced w.e.f. 30.08.2019.

The amended Section is reproduced as under: 

“29A.Time limit for arbitral award.–2[(1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23:

Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavor may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.]

…”

Thereby, the amendment left out applicability of the Section on the International Commercial Arbitrations in order to become a preferable seat of arbitration around the globe however, the same also raised several questions. 

Section 43 of the Limitation Act, 1963 and Section 21 of the Arbitration & Conciliation Act, 1996 are to be read together for commencement of arbitration proceedings. 

Further challenging an arbitral award under Section 34 of the Arbitration & Conciliation Act, 1996 specifically provides a limitation period of 3 months with a concession of 30 days’ delay on establishment of sufficient reasons and not thereafter, to challenge an arbitral award.

The Supreme Court in the case of M/s Simplex Infrastructure Ltd. v. Union of India (2019) 2 SCC 455:

“It is well to remember that Section 14 of the Limitation Act does not provide for a fresh period of limitation but only provides for the exclusion of a certain period. Having regard to the legislative intent, it will have to be held that the provisions of Section 14 of the Limitation Act, 1963 would be applicable to an application submitted under Section 34 of the Act of 1996 for setting aside an arbitral award.” The position of law is well settled with respect to the applicability of Section14 of the Limitation Act to an application filed under Section 34 of the 1996 Act.”

The question arises what happens to such limitation periods and timelines in light of the pandemic and difficulties faced by parties to arbitration proceedings to carry forward the procedure.

In furtherance to the current COVID – 19 times, the Supreme Court vide order dated 06.05.2020 under Suo Moto Writ (Civil) No. 3 of 2020 issued directions under I.A. No. 48411 of 2020 in lieu of the prayer made by the Applicant for arbitration proceedings in relation to Section 29A of the Arbitration & Conciliation Act, 1996 and Section 138 of the Negotiable Instruments Act, 1881.

In order to avoid lawyers/litigants from physically filing proceedings in respective Courts/Tribunal including the Supreme Court, the Court order that all periods of limitation prescribed under the Arbitration & Conciliation Act, 1996 under Section 138 of the Negotiable Instruments Act, 1881 to be extended with effect from 15.03.2020 till any further orders.

“In case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown.”

The extension of stipulated time period for the purpose of Section 29A of the Arbitration & Conciliation Act, 1996 beyond 15^th March, 2020 till the lockdown opens and an additional buffer period of 15 days thereafter, will not only guide and safeguard the interest of the parties but will also avoid additional filing of applications at the end of the parties to the arbitration.

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AMLEGALS is a specialised Corporate Law Firm. They advise, handle litigation & render non-litigation services. Their specialised areas of practice are in Arbitration, Goods & Services Tax (GST), Insolvency & Bankruptcy Code (IBC), Contracts & Agreements, IPR & Corporate Laws. AMLEGALS has offices in Ahmedabad, Mumbai, Kolkata & New Delhi to handle matters in High Courts, NCLT, NCLAT, CESTAT, VAT Tribunal, Income Tax Tribunals, Advance Ruling in GST, DRT & Arbitral Tribunals.  

Introduction 

The spread of Pandemic COVID-19 all around the globe has created a situation of hue and cry in different parts of the globe. The Pandemic COVID-19 has affected almost 22 Lakhs people and has caused death of almost 1.5 Lakhs of people all over the globe.

In order to contain the pandemic COVID-19 in India the Government of India and of different States has come up with various strategies and restrictions. One such strategy of Government of India is 21 days complete lockdown in India and subsequent extension till 03.05.2020.

Further, in order to contain the spread of Pandemic impacts, the Legislature, Executive and Judiciary has also come together and have been constantly coming up with amendments in laws, notifications, circulars and orders to control the situation. 

Taking into consideration the economic slowdown and hardship being faced by people certain amendments have been in the Insolvency and Bankruptcy for providing certain reliefs.

Impact on Insolvency Laws in India

The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as ‘IBC”) an exhaustive code came into force in December, 2016 with an objective of giving an opportunity of revival to insolvent corporates and liquidation being the last resort in order to keep the Corporate as a going concern. IBC also aims at promotion of entrepreneurship, enhancement of value of assets and balancing the interest of all stake holders.

As per Section 4 of IBC a case under IBC is made if there exists default of Rs. 1 lakh. Section 4 of IBC reads as follows:

“Section 4: Application of this Part-II (INSOLVENCY RESOLUTION AND LIQUIDATION FOR CORPORATE PERSONS):

(1) This Part shall apply to matters relating to the insolvency and liquidation of corporate debtors where the minimum amount of the default is one lakh rupees:

Provided that the Central Government may, by notification, specify the minimum amount of default of higher value which shall not be more than one crore rupees.”

Therefore, the Central Government while exercising its power as provided under proviso to Section 4 (1) of IBC vide Notification No. S.O. No. 1205 (E) dated 24.03.2020 has increased the threshold limit of default to One Crore Rupees. The Notification provides as follows:

“In exercise of the powers conferred by the proviso to section 4 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Central Government hereby specifies One Crore rupees as the minimum amount of default for the purposes of the said Section.”

Hence, by virtue of said Notification an application under Section 7, 8 or 10 of IBC can be filed only if the default amount is Rupees one crore or more instead of one lakh or more. The aforesaid increment in the threshold limit has been done in order to protect the MSME enterprises which would have otherwise hit IBC during the pandemic COVID-19 owing to lockdown in the Country.

Further, the Finance Minister in her speech (as available under Press Release ID: 1607942 dated 24.03.2020 released at 05:10 PM) has also declared that if the pandemic COVID-19 situation continues till 30.04.2020, the Government may consider and suspend the applicability of Section 7, 9 and 10 of IBC for six months. 

However, the said notification doesn’t clarify as to its applicability if it applies on default occurred prior to lock-down as well or it applies only to those defaults which occurred during the on-going lock-down. 

It is imperative to note that as per the purposive interpretation of statute after taking into consideration the objective behind the said interpretation it can be prudently concluded that the said notification is prospective in nature and is thus applicable on defaults during the pandemic COVID-19.

The Lockdown in Country has its impact over the on-going proceedings under IBC for which time is running under Section 12 of IBC. In order to provide justice after looking into the situation prevailing in the Country the Insolvency and Bankruptcy Board of India (hereinafter referred to as ‘IBBI’) has amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 via Press Release No. IBBI/PR/2020/06 dated 29.03.2020 by way of insertion of Regulation 40 C. 

Regulation 40C as inserted by IBBI reads as follows:

“Regulation 40C: Special provision relating to time-line- Notwithstanding the time-lines contained in these regulations, but subject to the provisions in the Code, the period of lockdown imposed by the Central Government in the wake of COVID19 outbreak shall not be counted for the purposes of the time-line for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process.”

The Insolvency and Bankruptcy Board of India (IBBI) vide Notification No. IBBI/2020-21/GN/REG060 dated 17.04.2020  came up with Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2020 and inserted Regulation 47A for exclusion of period of Lockdown in order while adhering to time line for Liquidation Process.

The Regulation 47A inserted vide aforesaid Amendment reads as follows:

“Exclusion of period of lockdown.

Regulation 47A: Subject to the provisions of the Code, the period of lockdown imposed by the Central Government in the wake of COVID-19 outbreak shall not be counted for the purposes of computation of the time-line for any task that could not be completed due to such lockdown, in relation to any liquidation process.”

The National Company Law Appellate Tribunal (hereinafter referred to as ‘NCLAT’) vide Suo Moto – Company Appeal (AT) (Insolvency) No. 01 of 2020, order dated 30.03.2020 has held that:

“That the period of lock-down ordered by the Central Government and the State Governments including the period as may be extended either in whole or part of the country, where the registered office of the Corporate Debtor may be located, shall be excluded for the purpose of counting of the period for ‘Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016, in all cases where ‘Corporate Insolvency Resolution Process’ has been initiated and pending before any Bench of the National Company Law Tribunal or in Appeal before this Appellate Tribunal.”

The aforesaid amendment and order of NCLAT has come as relief in light of the hardship being caused by the Lockdown in the Country owing to pandemic COVID-19.

In addition to the Legislature there are certain steps taken by the Supreme Court and Tribunals in response the pandemic COVID-19.

As per the Notice dated 22.03.2020 and 28.03.2020 issued by the Registrar of NCLT, the NCLTs were to remain close for judicial work till 31.03.2020. Further, on 31.03.2020,the Registrar has further extended it till 14.04.20 for all respective benches.

Thereafter, pursuant to extension of Lockdown till 03.05.2020, as per Notice dated 14.04.2020 by Registrar of NCLT all benches have been directed to extend the directions under Notice dated 22.03.2020 till 03.05.2020.

Moreover, the Supreme Court while exercising its special powers as laid down under Article 142 of Constitution of India vide Suo-Motu Writ Petition (Civil) No. 3/2020 has also passed an order suspending the running limitation period both under the General and Special Laws retrospectively from 15.03.2020 in light of the difficulty on part of litigants owing to pandemic COVID-19.

Therefore, aforesaid discussed are a few steps in response to the pandemic COVID-19 in India, after taking into consideration the hardship being faced, and in order to contain the pandemic effects.

Impact of Insolvency Laws in Singapore 

In order to combat the pandemic COVID-19 in Singapore a draft of COVID-19 (Temporary Measures) Bill has been drafted proposing a temporary stay on all the actions of Creditors for Non-Performance in respect of following:  

in each case wherein the obligation was due to be performed on or after 01.02.2020.

Further the threshold limit for filing of company bankruptcy has been raised from S$10,000 to S$100,000 and the statutory period for responding to the creditors demand has also been extended from twenty-one days to six months.

Impact of Insolvency Laws in UK 

The disruption being caused by the pandemic COVID-19 in the Country, the Government has responded to the pandemic in following manner:-

Therefore, the aforesaid are few responses by the Government with respect to the insolvency laws in UK to the pandemic COVID-19.

Conclusion 

The pandemic COVID-19 is spreading all across the countries and has been causing hardship to people at large. The various steps taken by the aforesaid discussed countries in response to the pandemic COVID-19 are to promote the entrepreneurship and to prevent the closure of business across the different countries during the pandemic.  The respective Governments have taken into consideration situation prevailing in their country and have come up with aforesaid steps to assist in prevention of closure of business considering their genuine difficulties in repayment of debts. 

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Anandaday Misshra is the Founder & Managing Partner, AMLEGALS, a multi-specialized law firm. He is a practising High Court Advocate with two decades of experience in litigation and arbitration. He specializes in GST, Contractual Laws, Arbitration, Business Laws & Insolvency Laws. He has authored book on GST- Law & Procedure (Taxmann). His other two upcoming books are on Insolvency & Bankruptcy Code and Arbitration.

While all major financial centres are now subject to an anti-money laundering framework, mainly due to the work of the Financial Action Task Force, many experts feel that not enough is being done to stop the huge flow of illicit funds that has been going through the banking sector. This article critically discusses whether the fight against money laundering is being won or lost.

INTRODUCTION

Many would be traumatized to learn that their wealth invested in a trustworthy institution, unwittingly doing business with banks involved in Money Laundering (ML) and Financing of Terrorism or even seize up in such activities themselves.¹ Over the past several decades, there has been ever-growing public and political concern with the threat posed by contemporary and sophisticated forms of transnational criminal undertakings.² The worldwide belief is that great development has been achieved through the endeavor of Financial Action Task Force (FATF) and other international bodies. This essay seeks to furnish an analysis as to whether that belief is precise. FATF has enjoyed an exceptional amount of triumph in raising awareness about ML/ Terrorism Financing (TF) and persuading states around the world to pledge to counter these serious threats to international security. In my opinion, FATF recommendations have caused most countries to take required steps that make them materialized to be better at protecting against ML than they actually are, and that in reality, these countries lack the obligatory effectiveness in their supervision. The outcomes of the essay support the idea that most of the countries are not doing so great as it would appear on the surface. 

It is specified that measures need to be taken by policy makers on several grounds. So as long as there exists an extensive inconsistency between the ability to stock illicit financial activity in developed and developing countries, the roots of all major financial centers will remain highly unprotected to abuse. 

Before discussing and analyzing about the fight against ML being won or lost; it is imperative to provide a brief description about ML, and some of its most relevant issues, as well as a description of FATF, its working, recommendations and what goes into establishing an effective anti-money laundering (AML)/ Countering Financial Terrorism (CFT) regime. Then, will talk briefly about other global and regional bodies that are also concerned with the fight against ML. Next, the evidence is presented which talks about the deficiencies that exist in AML frameworks.³ Finally, several suggestions for actions will be proposed along with conclusions. 

MONEY LAUNDERING

The term ML originated from the gangster Al Capone, who was put behind bars for tax evasion; converting his ill-gotten profits through launderettes to make it appear legal.⁴ ML is a global phenomenon. It is about concealing the origin and ownership of money earned from illegal means. In practice, illegal crimes include – fraud, bribery, corruption, drug trafficking, terrorism, arm trafficking.⁵ It is a type of “Dirty Money” and the comprehensive purpose of ML offence is to convert dirty money into clean money for concealing wealth, avoiding taxes, increasing profits and becoming legal.⁶ Criminals have constantly tried to conceal their money. The larger the amount illegally earned, the more difficult it becomes to disguise its origin and enjoy the profits of crime. Sudden, unaccountable wealth can draw the attention of officials. To camouflage the unlawful nature of money, criminals must go through three separate stages of ML:⁷ the first step involves the placement of the stolen funds converted into a more portable and less conspicuous form within a financial institution (F.I) or use of those funds to buy an asset.⁸ The second step, layering, seeks to obscure the origin of funds. In this phase, the money launderers frequently transfer the funds to various FI of various countries, making it tougher for law enforcement experts to follow the chain. In the last step, the funds must be integrated back into the financial system or economy, in the form investments, real estate or business ventures.⁹ Most ML systems depend on professional advisors who intentionally or unintentionally help in the layering and integration stages. These advisors are typically accountants, lawyers and agents known as Trust and Service Providers.¹⁰ The problems with the ML is that criminals function on an international basis – In this respect, national borders prove to be a motivation rather than a hurdle as far as money launderers are concerned. This is why an increasing number of individual criminals and criminal groups carry out their business in illegal products in global markets as well as becoming involved in international ML. They can select the weakest connection in the chain i.e. the country with the feeblest rules, where banking and professional secrecy is most rigorous and where bank administration is least effective and where the authorities shows no concern in international cooperation and permits criminal money to enter its financial system (FS) thus providing criminal access to global FS. This biased competition created by countries, which fascinate illegal funds through weak laws, and or their tax implementation – at the cost of countries with stern regulations – highlights the necessity of a global approach to fighting ML.¹¹

FINANCIAL ACTION TASK FORCE

FATF has come out as the prominent international body for evolving and encouraging AML/CFT controls, a self-described “Policy Making body” that works to bring about supervisory and legislative improvements.¹² The alarming increase in ML motivated the General Assembly of the United Nations at the Vienna Convention in 1988 to take a Universal vow to put a stop to ML¹³ and in 1989 the G-7 Summit in Paris set up the FATF to act as an inter-governmental body and build relations with various governments to tackle this cancerous problem. Its aim is to develop and encourage the proposed actions at a National and international level to fight against ML/TF.¹⁴ FATF has series of regulations, which were established in 1990; issuing 40 recommendations¹⁵ covering FS and its regulations, criminal justice, law enforcement, and problems regarding international cooperation and to serve against the recycling of funds derived from illegal means.¹⁶ These recommendations have been revised in 1996 and 2003 and are currently being revised in order to stay effective and well organized. After the attacks of September 11 2001, another eight recommendations were issued and one in 2004, comprising a total of 49 recommendations.¹⁷ The FATF’s significance lies in the fact that it has had an incredible success in getting countries around the globe to implement into its main principles and treat the 40+9 seriously. This “international” methodology to global governance has been made possible by two essential tools employed by the FATF: the mutual evaluation process (MER) and the ability to “name and shame” uncooperative states. The FATF supervises periodic Analyses of member countries’ to act in accordance with the 40+9 Recommendations, and assembles and publishes a detailed description of its outcomes in MER’s. This evaluation procedure is a central pillar in the FATF’s efforts to promote strong AML/CFT standards. In explaining the role of the MER, the FATF states: 

“The extent of these evaluations is to consider whether the necessary laws, guidelines or other measures required under the new standards are in force and effect, that there has been a complete and proper implementation of all essential measures and that the system in place is effective and well organized.

The evaluations are accompanied by a team of experts from the financial, legal and law enforcement fields, and include comprehensive on-site visits to the jurisdiction including general meetings with government officers and private sector entities. In terms of content, MERs include an outline of the economy, the system of government and financial sector of the country being assessed, and then a close inspection of the country’s compliance with each of the 40+9 Recommendations in turn, including recommendations for improvement. The degree of compliance with each Recommendation is ranked in one of four ways: “Compliant,” “Largely Compliant,” Partially Compliant,” and “Non-Compliant.” A standard MER will run to about 300 pages, which provides a sense of the detail and comprehensive analysis that goes into each assessment. The FATF’s mutual evaluation process thus symbolizes an excellent way for countries to identify the advantages and disadvantages of their domestic AML/CFT regimes and, more prominently, to target areas for improvement. 

The second tool that has brought the FATF influence in the international field goes hand-in-hand with its MER, and that is the ability to “name and shame” uncooperative states. International Cooperation Review Group (ICRG) in 2007 provides a technique for the FATF “to identify and to reply to jurisdictions with strategic flaws in their AML/CFT regimes that pose a danger to the international FS. Countries with sufficiently serious insufficiencies, as identified in the MER, are given the chance to advance their controls within a reasonable amount of time. If they fail to do so, the FATF can openly identify the jurisdiction and advise that states take counter actions to “protect themselves” from the risks coming from this jurisdiction. In practice, this means that the state is basically blacklisted from doing business with a majority of main financial centers around the world—because the respectable “heavy-hitters” of banking and finance in the United States, Europe and elsewhere prohibit or strictly limit financial transactions with institutions situated in a country designated as uncooperative by the FATF. 

The FATF’s occurrence as a valuable supporter of strong worldwide AML/CFT controls, and its success in raising consciousness regarding the menaces of ML and TF and in convincing states to progress in these areas is an outstanding achievement. Scholars have proclaimed that the FATF’s MER “seems to have an empirically visible impact with respect to improving banking systems and regulations, and it has been projected that “about 130 jurisdictions representing 85 percent of the world population, and about 90-95 percent of worldwide economic output, have made at least a political promise in implementing FATF recommendations.” 

However, while nobody would discuss that developing countries have particularly robust overall controls or that there are no important gaps that need to be focused, there is nevertheless a risk that the level of compliance among these countries is exaggerated. To justify this, it is necessary to examine deeper into the different types of FATF Recommendations and precisely what goes into building a strong domestic AML/CFT regime.

FATF 40+9 recommendations can be classified into four categories; those including the legal system, preventive measures for financial institutions and other entities and national and international cooperation.¹⁸ FATF recommendations 5-13, 21 and 22 describe the part of the Preventive measures system that administers to the private sector. These recommendations are designed to build a five-part requirement. (1) Create and maintain customer identity including beneficial owner, (2) create and preserve an up-to date customer profile, (3) observe transactions to see if they are suitable for the customer profile of transactions that are legal, (4) if not, inspect further any such transaction to see if it represents the proceeds of crime including the origin of funds, and (5) if so, inform about the transaction to the Financial Intelligence Unit, along with an explanation of why the Financial institution believes that the transaction is dubious. Recommendations 18,19 and 26-34 talks about the supervisory system as well as prosecution system and criminal investigation. The Private sector role emphasis on three fundamental objective; Firstly, to exclude possible criminal elements from the FS, Secondly, to give financial information to law enforcement authorities that can be used in criminal investigations, and the Third, is to discover customers who might be criminals by requiring the private sector to observe customer transactions. 

1. Customer- Identification, Profiling and Record- Keeping

FATF recommendation necessitates that FI must identify their customers, including the beneficial owner, which in the case of lawful persons includes taking equitable measures to identify the physical persons who own and rule the legal persons. Recommendation 12, comprehend these requirements to certain designated Non- financial businesses professionals (DNFBP), which include lawyers, accountants, notaries (professional enablers who help launderers in hiding assets), real estate agents (as it is of high value; it is frequently used as an Investment Vehicle by launderers), casinos 

(Dealing with cash that can be exchanged for chips), providing laundering opportunities. Recommendation 5 makes it necessary for FI and DNFBP to ascertain the purpose and deliberate nature of the business relationship of a possible client and knowledge of the customer’s profile and their business. This fulfils two purposes; (1) if customers identity and profile cannot be found, the financial institution must end the business relationship or not accept a transaction, and (2) future transactions of accepted customers can be estimated against the baseline of normal or classic transactions. A significant Development in 2003 Recommendations was the introduction of an optional risk-based approach.¹⁹ According to FATF a relevant person must create and maintain suitable and risk-based approach relating to Customer due diligence (CDD), record keeping, internal control, risk assessment, and ongoing monitoring.²⁰ FI is needed to undertake CDD measures when; starting business relations, carrying out infrequent transactions, there is suspicious of ML/TF, or the FI has doubts about the accuracy of previously acquired customer identification data.²¹ FATF recommendation 5, allows FI and DNFBP to control the extent of customer due diligence measures on a risk- sensitive basis depending on the kind of customer, transaction and business relationship and be able to show to his supervisory authority that the extent of measures is suitable in view of the threats of ML.²² Recommendation 10 demands that FI and DNFBP maintain customer track records, including transaction and identification records sufficient to allow reconstruction of individual transactions sufficient for proof in a prosecution and that these data be maintained for at least 5 years and be accessible for careful examination by the competent authority. This along, with Recommendation 5, authorizes investigation and prosecutorial authorities (lawyers) who tries to prove someone guilty to follow the money of criminal suspects 

2. Transaction Monitoring and Suspicious Transaction Reporting (STR):

Recommendation 11, entails that FI and DNFBP pay particular attention to complicated, unusual large transactions and unusual sequence of transactions with no apparent economic or observable lawful purpose, “inspect” as far as possible the background and purpose of transactions and show the findings in writings. Recommendation 13 requires that a FI and DNFBP report immediately to the governmental Financial Intelligence Unit (FIU) if they have reasonable grounds to believe that the funds earned are the result of a criminal activity. The system describes this as filing a suspicious transaction report. Recommendation 15 requires FI to evolve internal control, rules, policies and procedures for AML programs including internal training and audit capacities. Recommendation 25 entails that government authorities create guidelines and give feedbacks to help FI in detecting and reporting doubtful transactions.

PUBLIC SECTOR ROLE:

Recommendations 18,19,26-34 focus on three objectives: the first is to confirm that private sector acts in accordance with their preventive measures responsibilities. The second is to ensure the STR’s of appropriate cases of suspected crime is being investigated. It is decided by FIU, which analyzes these reports and then decided which should be further investigated and forwards to the appropriate authority (police). In order to ensure acceptance with preventive measures, Recommendation 23 requires that FI and DNFBP be subject, to sufficient regulation and supervision to ensure implementation of preventive measures, while Recommendation 29 and 17 require that supervisors have enough powers to ensure compliance includes the imposition of a sanction. Techniques used by Private sector to implement preventive measure:

3. Suspicious Transaction Analysis and Referral for Investigation 

Recommendation 26 requires that countries create a FIU that acts as a national Centre for the analysis, receiving and circulation of STR and other significant information regarding ML. moreover, it states that FIU should have access to on a timely basis to the administrative, financial and law enforcement information that is needed in undertaking its functions, including the analysis of STR. Recommendation 10, mentions that competent authorities should have access to the information’s kept by FI and DNFBP.²³ Finally, recommendation 40 ensures that their competent authorities can constructively, rapidly and successfully provide the comprehensive range of international cooperation in relation to ML, associated serious offences and TF. Countries should allow their authorities to use the most systematic means to cooperate. These authorities are required to use clear channels or techniques for the successful transmission and implementation of requests for information or assistance.²⁴

OTHER GLOBAL AND REGIONAL BODIES: 

The FATF cannot work in isolation in order to effectively protect the global financial system. It relies on the partnerships with the FATF Regional and global bodies to extend the successful implementation of the FATF recommendations beyond its own membership.²⁵ The following organizations are also concerned with the fight against ML on a global and regional basis:

The United Nations Drug Control Programme (UNDCP) is concerned with the fight against illegal manufacture; trafficking and misuse of narcotics as well as fighting ML have been strengthened since 1992. 

International Police Organization (INTERNPOL) functions as a financial clearinghouse with the purpose of simplifying the exchange of information on international financial flows.

Council of Europe: The Pompiduo Group, interministerial collaboration group, a multi-disciplinary within the Council of Europe, deals with the battle against illegal drug trading and drug abuse. 

Organization of American States (OAS) objective is to improve national criminal law and international cooperation as well as strengthening the role performed by the financial system in efforts to combat ML.

Caribbean Financial Action Task Force (CFATF): In November 1992, the country ministers in Jamaica passed “the Kingston Declaration on ML”. The declaration clearly approves the 40 FATF recommendations as well as 19 recommendations particular to the region, which were formulated at the Aruba conference (1990), and binds the CFATF member states to apply these recommendations. 

European Police Authority (EUROPOL): The duty of this authority is to collect and examine intelligence and to improve cooperation between member states on the issues of stopping cross-border organized crime, drug smuggling and related ML within the EU context.²⁶

AML AND EFFECTIVENESS: A MISCONCEPTION? 

Drawbacks in the AML framework make it susceptible to corrupt money flowing into the economy. At the heart of the problem is the fact that there are numerous supervisory bodies, mostly private sector institutions running AML efforts in sectors such as banking, property and luxury goods. This patchwork of supervisors results in a system, which is structurally unreliable and presents an unpredictable, uncertain and unhelpful environment for businesses that are intending to stand by the rules.²⁷ After over 28 years of ML prevention, the outcomes are disappointing: organized crime and drug trafficking still prosper. Banks face an extraordinary burden because of their active participation in money laundering prevention. The various prevention schemes have deteriorated the basic rights of the bank clients, who have to pay for the preventive measures. The task of fighting against ML is becoming more difficult, due to the increasingly worldwide and virtual nature of financial services, permitting crypto currencies (bit coins) and easily accessible anonymization tools to disguise criminal activity and frustrate the identification of beneficial owner. Controlling much of this mega-illegal activity are global ML syndicates, who offer their facilities at scale to criminal networks, and are highly good at exploiting gaps in the financial system. These are the challenging situations within which AML framework of the banking sector presently operate. They set a very high bar for success in restraining the international flows of illicit funds. And we are nowhere near attaining that standard. Why is the success ratio of the system so insignificant and what can be done about it? Global banks invest billions of dollars each year meeting strict AML policies. Financial crime compliance has become a vast and an expensive business, reflecting the high significance of bringing order to systemic attempts to stop the criminal misuse of the financial system. So why has this level of investment not brought a better strategic impact on the problem? One main reason identified by global banks, law enforcement authorities and the FATF, is that the supervisory regime is highly inefficient and disorganized. To meet regulatory principles banks run sophisticated procedures to monitor millions of transactions, producing high amounts of alerts for individual assessment by compliance officers. The present system designed to prevent ML/TF is based on a faulty theoretical structure.²⁸ According to a senior executive, in one international bank only some 5% of those assessed ever reach the standard of being filed as a STR to law enforcement. The rest are rejected. The strategic goal of the entire system seems to have become lost in the detailed design and application of the regime. That’s not to say that the rules themselves don’t seem to be vital. They represent the necessary building blocks from which a successful impact can be made. That has not been accomplished yet because the underpinning investment has lacked focus and has generally failed to abuse the intelligence potential of the statistics held within the financial sector.²⁹ Michael Foot, the Financial Services Authority’s managing director described the condition as “highly sub-optimal”. In a lecture attended by building society leaders, Mr. Foot said that the current measures to combat the laundering of the proceeds of drug and other related crimes through banks and building societies was not satisfactory. He told his audience that there was “a great arrangement of ML going on throughout the UK”. John Good fellow, chairman of the Building Societies Association, said: “In the UK, and my own building society in particular, we take the prevention of ML very seriously. “However, though we are filing more and more notices, it seems they are vanishing into a black hole. We have no idea if the cases we report are even being examined. What result our efforts are having on combating ML crime in the UK remains a mystery.”³⁰ In the UK, around 75% of corruption cases involving property are investigated by the Metropolitan Police’s Proceeds of Corruption Unit (POCU) involved unknown companies registered in secrecy jurisdictions. The report “Corruption on Your Doorstep”, confirms that purchasing property is one of the ML methods of choice for corrupt individuals. Between 2004-2005 the POCU, now the International Corruption Unit (ICU) operating within the NCA, discovered £180m worth of property was under investigation as being the profits of corruption. The statistics shows that companies registered in offshore jurisdictions own over 36,000 properties in London. Unidentified companies own almost 10% of properties in Westminster. This is likely to be undervalued, as many titles in the Land Registry held by offshore entities contain no evidence of the price paid for the property. Corrupt individuals make use of the UK’s Tier 1 (investor) visa system – commonly known as golden visas – to secure citizenship in the UK, thereby receiving an implicit authorization of their money’s legitimacy from the UK state. Immigrants can apply for permanent citizenship after five years by investing £2m into the UK’s economy. The waiting duration can be reduced to three years by investing £5m and those investing £10m can be awarded permanent residency after two years. There are number of difficulties with this system which leave it vulnerable to abuse from corrupt individuals. Despite the clear threat of ML through the Tier 1 visa process, there is no dedicated system of ML checks for applicants. In addition to the worrying lack of checks, there is no transparency around the system.³¹

The current European Union (EU) AML framework does not prevent illegal money from flowing through Europe’s financial Centre’s according to a new report by Transparency International EU. Despite the political eloquence and public outcry following Panama Papers Russian Laundromat exposures there are still major issues when it comes to both AML rules and their implementation by European countries.³² Deutsche Bank has been penalized more than $630m for failing to prevent $10bn of Russian ML and exposing the UK FS to the risk of financial crime. Previously also Deutsche Bank has been penalized in January 2017 £500m for Russian ML offences, January 2017 £75m to resolve a US government case over hiding tax liabilities to the Internal Revenue Service in 2000, November 2015 £200m for breaking US sanctions with Iran and Syria. The UK’s Financial Conduct Authority imposed its largest-ever fine – £163m for ML offences on Germany’s biggest bank, which it said had wasted several opportunities to lock down on the activities of its Russian operations as a result of feeble systems to detect financial crime between 2012 and 2015.³³ Back in 2012, HSBC lost £1.2 billion for having insufficient ML controls. The bank had provided banking services and American dollars to banks in Saudi Arabia in spite of their networks to TF. In 2010, Wachovia paid federal authorities a total amount of £123.7m for willingly lacking to establish an adequate AML system and subsequently authorizing, from 2004-2007, the transmission of an estimated £292.5 billion into dollar accounts from money exchangers in Mexico that the bank did business with.³⁴ Recently, Commonwealth Bank of Australia confesses multiple violations in ML case. The Austrac case, when first exposed in August 2017, sent shockwaves through Australian banking sector, increasing political pressure for a public inquiry into banks’ misconduct that was finally approved last month December.³⁵

SUGGESTIONS:

The well-known legislative framework against ML still needs to be intensified by developing robust legislative rules, well-organized national and international cooperation between institutions and authorities and adequate policies are required. The foremost aim of the legislation should be the need to have stricter regulations on the subject of CDD and reporting of STR’s, which previously restricted its identification procedure in the adoption of the clause “know your customer” which led to very limited outcomes.³⁶ Analysis of patterns and trends in ML, institutions and sectors of the economy occupied by criminals, effect of ML in the national economy should be made. Pursuit of a flexible, repetitively developing strategy by all countries with regard to a systematic approach to fighting drug cartels, with the purpose of preventing Money Launderers gaining political influence, in order to eliminate weak links in the FS caused by unreliable measures should be revised.³⁷ There should be transparency to the Tier 1 investors visa system with public disclosure of who is investing, how much investing, what they are investing in and their financial assets and interests. There should be re-thought about the supervisory regime for the UK’s AML procedures, especially for professional enablers. The supervisors should meet the good practice standards of transparent enforcement, risk-based approach, and guarantee that all the countries around the globe effectively implement FATF measures regarding Professional enablers.³⁸ What is lacking in any systematic way from the existing mutual evaluations is a prominent assessment of how well a jurisdiction is implementing the standards and whether this successfully limits financial crime.³⁹ FATF should emphasis on ways to influence countries to improve their oversight and supervision of domestic entities in order to create successful ML/TF regimes.⁴⁰ FATF should encourage supervisors to carry out anonymous shopping exercises to see whether FI is properly implementing the AML rules. One of the criticisms of the existing FATF MER is that they are opaque, long, and do not do enough to specify top priorities for changes that countries need to make. FATF should review the 40+9 recommendations to ensure that MER provides a prioritized work plan for assessed countries. This can then be followed up by the assessment experts to ensure the country is working towards successful compliance. If MER becomes shorter, simpler and more prioritized they will gather more attention in assessed countries.⁴¹ FATF should also ensure that all the transactions, which are actually “suspicious”, should be reported to and investigated by the appropriate authority. The national authorities should take more effective actions against ML/TF at all stages from the identification of bank clients opening an account through investigation, trial and penalty of assets. At the global level, the FATF should also monitor and take actions to encourage implementation of the standards.⁴² Fight against ML is resource intensive; therefore, a special budget should be assigned for the capacity building of staffs through training. Timely guidance and support of foreign- trained instructors in combating ML should be taken. Implementation of AML measures should be transparent, reliable and well timed. The Collection, maintenance and distribution of information related to clients should be managed properly. Dealings taking place in the banking sector should be checked on daily basis.⁴³

CONCLUSION:

The existing system designed to prevent ML/TF does not work well,⁴⁴ as it fails to achieve its own original goals, which is to reduce predicate offence. It is erroneous to conclude that the current AML framework is not strong enough⁴⁵ because FATF has enjoyed an extraordinary amount of achievement in raising awareness about ML/TF problems and encouraging states around the world to commit to countering these serious dangers to international security. However, a closer investigation of what has truly been done to stop these crimes worldwide lack the effective oversight and regulatory systems necessary to ensure that their national institutions have robust controls in place. Only a continuous and imaginative determination to create effective ML/TF controls on a global scale will have a chance of making the international financial system a secure place in which to operate.⁴⁶ Also, good progress has been made on many fronts, countries globally reconsidering the adequacy of their AML regimes and taking remedial actions.⁴⁷ A number of recommendations, rules, and policies have been introduced to combat ML, which has improved the situation since 1990, but, however, the fact that it lacks universal implementation of the established standards makes it vulnerable to abuse. The supervisory and regulatory regimes are also highly disorganized and inefficient. The endeavor to combat ML is endless because criminals will always seek new ways to move the proceeds of crime. It is a battle that needs constant vigilance and is not so much a matter of fight against ML being won or lost, but of just trying to stay up-to-date with the latest tactics.⁴⁸

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Preeti Ahluwalia is a practicing Advocate at the Delhi High Court. She has pursued her BA. LL.B from Amity University, Noida and  LL.M in International Business Law from the University of Leeds, United Kingdom. Ms. Ahluwalia has secured a distinction in her Master’s thesis. Recently, she secured 74% in a certification course on Blockchain and the Law. Ms. Ahluwalia has interest mostly in Research and Writing in all areas of law ( personal interest in Blockchain Technology, bitcoins, legality, AI). 

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Endnotes:

[1] Brandon James Reddington, ‘Assessing the true effectiveness of AML/CFT controls in developing countries’ (Georgetownedu, April 15, 2011)

<https://repository.library.georgetown.edu/bitstream/handle/10822/553564/reddingtonBrandon.pdf? Sequence=1> accessed 25 March 2020

[2] Council of Europe Press, Dirty Money (Council of Europe 1995) 13-14

[3] Brandon James Reddington, ‘Assessing the true effectiveness of AML/CFT controls in developing countries’ (Georgetownedu, April 15, 2011)

<https://repository.library.georgetown.edu/bitstream/handle/10822/553564/reddingtonBrandon.pdf? Sequence=1> accessed 25 March 2020

[4] Joras Ferwerda, ‘The Economics of Crime and Money Laundering: Does Anti-Money Laundering Policy Reduce Crime?’ (Universiteit Utrecht, Nov, 2008)

<https://www.uu.nl/sites/default/files/rebo_use_dp_2008_08-35.pdf>> accessed 3 April 2020

[5] Mark Gregory, ‘Stashing the cash: banks, money laundering and the battle against illegal logging’ (Fern making the EU work for people and forests, September 2015)

<http://www.fern.org/sites/fern.org/files/Money%20Laundering%20final%20report%20191015_a. >accessed 25 March 2020

[6] UsmanKemal Muhammad, ‘”Anti-money laundering regulations and its effectiveness”‘ [2014] 17(4) Journal of Money Laundering Control 416-427

[7] Miriam Wasserman, ‘Dirty Money’ [2002] 12(1) Regional Review 1st Quarter 14

[8] ibid p14

[9] HeidiM Schooner and Michael Taylor, Global Bank Regulation Principles and Policies (Academic Press 2010) 224-225

[10] Steve Goodrich, ‘PARADISE LOST: ENDING THE UK’S ROLE AS A SAFE HAVEN FOR CORRUPT INDIVIDUALS, THEIR ALLIES AND ASSETS’ 

(Transparency International UK fighting corruption worldwide, April 2016) <http://www.transparency.org.uk/publications/paradise-lost/#WkVzKiOcY_V> accessed 25 March 2020

[11] Johannes Dumbacher, ‘The fight against money laundering’ [July, 1995] 30(4) INTERECONOMICS 177-186

[12] (FATF Website) <http://www.fatf-gafi.org/about/whoweare/> accessed 30 December 2017

[13] Jackie Johnson, Y. C. Desmond Lim, (2003) “Money laundering: has the Financial Action Task Force made a difference?”, Journal of Financial Crime, Vol. 10 Issue: 1, pp.7-22

[14] Essay UK, Essay: International initiatives to fight money laundering. Available from:

<http://www.essay.uk.com/essays/law/essay-international-initiatives-to-fight-money-laundering/> [30-12-17]

[15] UsmanKemal Muhammad, ‘”Anti-money laundering regulations and its effectiveness”‘ [2014] 17(4) Journal of Money Laundering Control 416-427

[16] Jackie Johnson, Y. C. Desmond Lim, (2003) “Money laundering: has the Financial Action Task Force made a difference?”, Journal of Financial Crime, Vol. 10 Issue: 1, pp.7-22

[17] HE Ping, ‘The measures on combating money laundering and terrorism financing in the PRC: From the perspective of financial action task force’ [2008] 11(4) Journal of Money Laundering Control; London 320-330

[18] Brandon James Reddington, ‘Assessing the true effectiveness of AML/CFT controls in developing countries’ (Georgetownedu, April 15, 2011)

<https://repository.library.georgetown.edu/bitstream/handle/10822/553564/reddingtonBrandon.pdf? Sequence=1> accessed 29 March 2020

[19] RICHARDK Gordon, ‘LOSING THE WAR AGAINST DIRTY MONEY: RETHINKING GLOBAL STANDARDS ON PREVENTING MONEY LAUNDERING AND TERRORISM FINANCING’ 

(Scholarshiplawdukeedu, 7July2011) <https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1019&context=djcil> accessed 2 April 2020

[20] Nicholas Ryder, Money Laundering – An Endless Cycle? (Routledge 2012) 77

[21] Fatf, ‘INTERNATIONAL STANDARDS ON COMBATING MONEY LAUNDERING AND THE FINANCING OF TERRORISM & PROLIFERATION updated October 2016’ (Financial Action Task Force, February 2012) <http://www.fatf-gafi.org/media/fatf/documents/recommendations/pdfs/FATF_Recommendations.pdf>accessed 4 April 2020

[22] Nicholas Ryder, Money Laundering – An Endless Cycle? (Routledge 2012) 77

[23] RICHARDK Gordon, ‘LOSING THE WAR AGAINST DIRTY MONEY: RETHINKING GLOBAL STANDARDS ON PREVENTING MONEY LAUNDERING AND TERRORISM FINANCING’ 

(Scholarshiplawdukeedu, 7July2011) <https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1019&context=djcil> accessed 25 March 2020

[24] ERM Institute, ‘Anti- Money Laundering and Financial Crime ‘ (The fatf recommendations – ERM Institute, June 2015) 

<ermigh.com/wp-content/uploads/2015/06/FATF-Rec.pptx> accessed 25 March 2020

[25] Fatf, ‘Financial Action Task Force Annual Report 2015-2016’ (FATF Website, 2017) 

<http://www.fatf-gafi.org/media/fatf/documents/reports/FATF-annual-report-2015-2016.pdf> accessed 25 March 2020

[26] Johannes Dumbacher, ‘The fight against money laundering’ [July, 1995] 30(4) INTERECONOMICS177-186

[27] Steve Goodrich, ‘PARADISE LOST: ENDING THE UK’S ROLE AS A SAFE HAVEN FOR CORRUPT INDIVIDUALS, THEIR ALLIES AND ASSETS’ (Transparency International UK fighting corruption worldwide, April 2016) 

<http://www.transparency.org.uk/publications/paradise-lost/#WkVzKiOcY_V> accessed 25 March 2020

[28] RICHARDK Gordon, ‘LOSING THE WAR AGAINST DIRTY MONEY: RETHINKING GLOBAL STANDARDS ON PREVENTING MONEY LAUNDERING AND TERRORISM FINANCING’ 

(Scholarshiplawdukeedu, 7July2011) <https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1019&context=djcil> accessed 29 March 2020

[29] Rob Wainwright, ‘How we are losing the fight against global money laundering’ (LinkedIn website, 25 Oct 2017) 

<https://www.linkedin.com/pulse/how-we-losing-fight-against-global-money-laundering-rob-wainwright/> accessed 26 March 2020

[30] Anne Ashworth, ‘Money laundering fight ‘being lost’’ (The Times Website, 19 May 2013) 

<https://www.thetimes.co.uk/article/money-laundering-fight-being-lost-w90wmpdllm3> accessed 3 April 2020

[31] Steve Goodrich, ‘PARADISE LOST: ENDING THE UK’S ROLE AS A SAFE HAVEN FOR CORRUPT INDIVIDUALS, THEIR ALLIES AND ASSETS’ 

(Transparency International UK fighting corruption worldwide, April

[32] Admin, ‘Major flaws in European anti-money laundering regimes exposed by new Transparency International EU report’ (Transparency International EU, 25 April 2017) 

<http://transparency.eu/flaws-aml/> accessed 3 April 2020

[33] Jill Treanor, ‘Deutsche Bank fined $630m over Russia money laundering claims’ (The guardian, 31 Jan 2017) 

<https://www.theguardian.com/business/2017/jan/31/deutsche-bank-fined-630m-over-russia-money-laundering-claims> accessed 29 March 2020

[34] Holly Whitehead, ‘Top 5 Money Laundering Cases of the Last 30 Years’ (International Compliance Training, 22 July 2016) 

<https://www.int-comp.com/ict-views/posts/2016/07/22/top-5-money-laundering-cases-of-the-last-30-years/> accessed 4 January 2018

[35] Jamie Smyth, ‘Commonwealth Bank admits multiple breaches in money laundering case’ (Financial Times, 13 December 2017)

 <https://www.ft.com/content/f293993e-dfe2-11e7-a8a4-0a1e63a52f9c> accessed 21 March 2020

[36] Mario Borghezio, ‘Special Committee on Organised Crime, Corruption and Money Laundering (CRIM) 2012-2013’ (Europarleuropaeu, January 2013)

<http://www.europarl.europa.eu/meetdocs/2009_2014/documents/crim/dv/borghezio_ml_/borghezio_ml_en.pdf> accessed 4 January 2018

[37] Johannes Dumbacher, ‘The fight against money laundering’ [July, 1995] 30(4) INTERECONOMICS177-186

[38] Steve Goodrich, ‘PARADISE LOST: ENDING THE UK’S ROLE AS A SAFE HAVEN FOR CORRUPT INDIVIDUALS, THEIR ALLIES AND ASSETS’ (Transparency International UK fighting corruption worldwide, April 2016)

<http://www.transparency.org.uk/publications/paradise-lost/#WkVzKiOcY_V> accessed 25 March 2020

[39] Global Witness, ‘How FATF can measure and promote an effective anti-money laundering system’ (Global witness, June 2012)

<https://www.globalwitness.org/sites/default/files/library/How%20FATF%20can%20measure%20and%20promote%20an%20effective%20anti-money%20laundering%20system.pdf> accessed 25 March 2020

[40] Brandon James Reddington, ‘Assessing the true effectiveness of AML/CFT controls in developing countries’ (Georgetownedu, April 15, 2011)

<https://repository.library.georgetown.edu/bitstream/handle/10822/553564/reddingtonBrandon.pdf? Sequence=1> accessed 25 March 2020

[41] Global Witness, ‘How FATF can measure and promote an effective anti-money laundering system’ (Global witness, June 2012)

<https://www.globalwitness.org/sites/default/files/library/How%20FATF%20can%20measure%20and%20promote%20an%20effective%20anti-money%20laundering%20system.pdf> accessed 23 March 2020

[42] Essay UK, Essay: International initiatives to fight money laundering. Available from: <http://www.essay.uk.com/essays/law/essay-international-initiatives-to-fight-money-laundering/> [30-12-17]

[43] UsmanKemal Muhammad, ‘”Anti-money laundering regulations and its effectiveness”‘ [2014] 17(4) Journal of Money Laundering Control 416-427

[44] RICHARDK Gordon, ‘LOSING THE WAR AGAINST DIRTY MONEY: RETHINKING GLOBAL STANDARDS ON PREVENTING MONEY LAUNDERING AND TERRORISM FINANCING’ 

(Scholarshiplawdukeedu, 7July2011) <https://scholarship.law.duke.edu/cgi/viewcontent.cgi? article=1019&context=djcil> accessed 27 March 2020

[45] Geiger Hans and Wuensch, Oliver, ‘Journal of Money Laundering Control; London’ [2007] 10(1) The fight against money laundering: An economic analysis of a cost-benefit paradoxon 91-105

[46] Brandon James Reddington, ‘Assessing the true effectiveness of AML/CFT controls in developing countries’ (Georgetownedu, April 15, 2011)

<https://repository.library.georgetown.edu/bitstream/handle/10822/553564/reddingtonBrandon.pdf? Sequence=1> accessed 25 March 2020

[47] Aninat Eduardo and others, ‘Finance & Development’ [2002] 39(3) Journal of Finance: Washington 44-47

[48] PETER J. Henning, ‘The Challenges of Fighting Money Laundering’ (The New York Times Website, 3 August 2015)

<https://www.nytimes.com/2015/08/04/business/dealbook/the-challenges-of-fighting-money-laundering.html> accessed 25 March 2020

Introduction 

Humanity is witnessing an unfortunate and unprecedented crisis following the outbreak of novel coronavirus late last year. With an extremely fast rate of infection, coronavirus pandemic has quickly engulfed virtually entire globe. It has, till 23^rd April 2020, globally infected around 2.6 million people and claimed lives of more than 1,83,000 people so far. People have gone into panic while governments are desperate to grapple with the crisis. With no treatment yet around to tackle the pandemic, authorities in several countries have resorted to closedown of entire cities and towns and in some cases, like India, the whole country. 

Besides endangering the health of entire mankind, the coronavirus pandemic has put world economy under tremendous stress. The entire country is under the lockdown with effect from 24^th of March 2020 first for 3 weeks followed by the extension of 2 more weeks and still speculations going on. Its costs could be devastating having potential to cause tremendous sufferings to millions of poor most of whom constitute the country’s vast working class. 

Effects on the Indian employment system 

India has an estimated 470 million strong working class. Almost 80% of them are in the unorganised sector, majority of them having hardly any social security cover. They constitute small and marginal farmers, contractual labourers, construction workers, daily wagers, and employees of petty businesses, along with salaried class both public and private. This has taken a heavy toll and added to the stress of both employers and the employees. During this challenging time, where employees are facing challenges to protect their jobs, employers are left wondering what their obligations are towards their employees and how best to manage these obligations. On one hand where the employers are contemplating about downsizing their operations and terminating their employees or reducing the wages, they are not sure about the legal implications of the same. Despite a plethora of labour laws governing employer-worker relationship, Modi government at the centre and various state governments have been issuing advisories to employers to safeguard workers against retrenchment/termination, lay-offs, forced leave/leave without pay, reduction of wages etc. The government advisories urge employers not to terminate employees or reduce their wages 

In the light of such laws and the advisories issued from time to time , let us discuss various legal implications and legalities of such retrenchments, layoffs etc. viz a viz; type of employees, sectors they are working in and the laws applicable . 

Workmen/ wage earners 

Indian employment system is somewhat bureaucratic in nature. The main distinction is whether the employee is a “workman” or otherwise and earning “wages” with the application of most of the legislations to workman category. High degree of protection has been ensured to the workers through various labour laws which came into force from time to time. Some legislations like the Industrial Disputes Act, 1947, Contract labour Act, Payment of wages Act, Workmen’s Compensation Act, the relevant state Shops and Establishments Acts etc make it obligatory for employers to pursue labour friendly policies. For Instance, Government Order No. 40-3/2020-DM-I(A) dated March 29,2020 issued by the Ministry of Home Affairs, Government of India under the Disaster Management Act, 2005 clearly mentions the responsibility of the employer towards its ‘workers’ drawing ‘wages’ during the lockdown caused by COVID-19 crisis. In order to ascertain as to the applicability of such orders/ notifications/ mandates, it becomes necessary to interpret the word ‘Worker’ and ‘Wages’ as defined under Industrial disputes Act 1947 and payment of wages act 1936 respectively along with Factories Act and SCE Act which leaves most corporates and employees engaged in industries, factories and other establishment, but performing managerial, administrative and supervisory functions outside the ambit. Further, the POW Act also clearly states under section 1(6) that it is applicable upon such class of employees whose wage does not exceed INR 24000 (Indian Rupees Twenty-Four Thousand) per month. 

Therefore in light of the above, one can say that during such crisis, it becomes mandatory to pay wages to such employees which come under the purview of definition of ‘workman’ and those employee which are non-exempted by the SCE Act of the respective State. Also, the employees who are earning wages, cannot be terminated in light of the said MHA Order and shall continue to be employed and paid until the lockdown continues or until such time as prescribed by the Government of India. An employer cannot and is under no right to reduce the wages or terminate such employees unless there is a specific contract which makes the employer eligible to do so. 

Non workmen / employment contract governed 

Broadly speaking , Such employees who are not paid wages As per the POW Act or do not come within the definition of workman under Industrial Disputes Act 1947or under various other statutes are governed by the employer and employee agreement or the standing orders of the particular establishment. In view of that there are no statutory obligations on the part of the employer or the organization to pay salaries to such employees or to retain them. 

Termination for such employees will have to be carried out as per the employment contract duly executed between them and/ or as per the SCE Act of the relevant jurisdiction where the employee is located and is engaged by the employer. 

Recently Karnataka Shops and Establishments Act, 1962 has passed a similar mandate for the employers to provide a minimum of 1 month of notice prior to dismissal or wages in lieu of such notice3 for an employee who is in continuous employment of the employer for the period of six (6) months or more. Further, the Karnataka Act also prescribes that any such termination shall be made by giving a reasonable cause to the employee. Loss of business, poor performance, etc., is all valid reasons to terminate employees. Therefore, all the terminations in Karnataka shall be governed by this mandate along with the contacts unless there is some mutual agreement arrived at between the employer and the employee otherwise 

Employees of private organizations/ MNC’s 

A vital question which emerges out is whether the employer of a private organization or a MNC who is not bound specifically by any statutory provisions or advisories is entitled to retrench, lay off etc. his employees if he is under a financial hardship. The answer is “YES” however owing to the onus to prove the valid termination is entirely upon the employer and it would involve payment of various statutory dues including retrenchment compensation, which the companies would ill afford in the present circumstances of financial crunch, most of them have resorted to certain ‘alternatives’ to the termination of employees and the employment contracts, a few of which are listed below: 

• Work from home: The concept in which the employee performs its works at home or out of the office via technological means has been now opted by most of the companies/ employers for their employees. Though the concept is not new to the Indian employer, there are hardly any labour statues or official guidelines governing it. However, statutory provisions governing working conditions as if working in office premises would apply. 

• Unpaid leave: Employers with mutual agreement may request their employees to take the unpaid leaves so that there is some respite for both. Even by mutual consent employees may accept the reduced salaries in case they see the threat of company going into financial losses which might lead to winding up eventually. 

• Annual leaves: Employers may request its employees to Take their accrued annual leaves which otherwise the employees are entitled to take at their discretion. The employees would generally accept that the employer is exercising its management rights with good faith. 

Therefore, in a way it becomes a moral obligation for the employees too to not burden their employers beyond a limit. 

Contract /daily wagers etc 

Again any such daily wager, casual or contractual workers or employees / workers under any other category are governed by the advisories and guidelines which prohibit their termination during the crisis. The Ministry of Labour and Employment, Government of India issued an advisory on 20.3.2020 to the Chief Secretary of all the States/ Union Territories and also to the All Employers’ Association appealing to extend their coordination by not terminating their employees or reduce their wages .Various other state governments such as Maharashtra, Haryana, and Delhi have also issued similar advisories especially the Haryana Govt advisory which specifically covers “casual or contractual workers “and extend protection from termination from their jobs or reduction in their wages. 

Conclusion: We may conclude by saying that no matter what the crisis and what sector we look into, the employment rules and statutes are in place for all the citizens of India and termination and non-payment of wages is not an option except agreed otherwise mutually or under an employment contract. It is not known how long coronavirus pandemic will last causing tremendous economic damage already. Various countries have announced packages to pep up their economic condition. How far they will help in mitigating the situation is being fiercely debated by the experts as well as common people. In the meantime, the employers and the workers will have to evolve and stand up to the emerging scenarios. 

****

Gautam Khurana is the founder & Managing Partner of India Law Offices LLP. He has obtained his B.Com(H) from the prestigious Sri Ram College of Commerce, Delhi University and is a Law graduate from Campus Law Centre, Delhi University. He specializes in Foreign Inward Investments and Corporate Laws in India, with extensive experiences in acquisitions, corporate laws, cross-border litigation & arbitration, insolvency and bankruptcy, project & structured financing and direct & indirect taxes within both domestic & overseas jurisdictions. He is currently on the board of the reputed Indian as well as International companies and has advised clients across diverse sectors on projects including joint ventures, inbound investments, and acquisitions. He is a frequent speaker in many Domestic & International Conferences. He also wrote the Indian chapter in “Shareholder Agreements – a Comparative Handbook” by Warwick Legal Network covering 17 countries worldwide.

National Agricultural Cooperative Marketing Federation of India v. Alimenta SA [CIVIL APPEAL NO. 667 OF 2012] – SUPREME COURT OF INDIA

FACTS

The parties in question i.e. the Appellant and the Respondent entered into a contract dated 12.01.1980 (“first agreement”) for supply of 5000 metric tons of India HPS groundnut (“the said goods”) at the rate of USD 765 PMT for the season 1979-1980.  The Contract was not a Free on Board contract but a CIF contract as per the terms of Federation of Oils, Seeds and Fats Association (“FOSFA”).

The Appellant was a canalizing agency for the Government of India for exports of the said goods. The Appellant therefore, required an express permission from the government while carrying forward any export quantity from the previous year to the coming year.

On 03.04.1980, the Appellant entered into another agreement for export of 4000 MT at the rate of USD 770 PMT (“second agreement”), the shipment period for which was August-September, 1980. This agreement is not the subject matter of dispute in this appeal.

The Appellant could only ship 1900 MT out of the total quantity of 5000 MT as agreed under the first agreement due to damaged crops because of a cyclone. The balance 3100 MT of the said goods could not be shipped as scheduled due to Government restrictions.

It is pertinent to note that the first agreement contained a Force Majeure and Prohibition clause under Clause 14 whereby, a prohibition of export by the order of the executive or by law would be treated as a cancellation of the agreement. 

In 1980-81, due to a crop failure in the United States of America, the price of the said goods increased in the course of season leading to execution of an Addendum to the first agreement whereby the period of export was changed to November – December, 1980 for the balance 3100 MT. On 08.10.1980, second addendum to the first agreement was executed wherein it was agreed that the said goods would be shipped during 1980-81 season, whereby the said goods would be packed in new double gunny bags with the buyers paying extra cost of USD 15 PMT.

The Appellant had permission of the Government of India to enter into exports for a period of three years between1977-80 but had no permission to carry forward the exports for the season 1977-80 to the year 1981. The Appellant claimed that they were not aware of this restriction at the time of executing the addendums to the first agreement.

The Appellant approached the Government of India for permission to release the quota in the current season to fulfil its commitments under the contracts, however the same was denied by the Ministry of Agriculture on 01.12.1980. The Appellant again requested for the permission to fulfil contracts on 06.12.1980 and 09.12.1980 but the same were rejected again. 

This was informed to the Respondent on 13.02.1981, who was asked not to nominate the vessel for shipment of the crop due to the prohibition to supply the contracted quantity. This message was treated as a Notice of Default made to make the supply.

The Respondent therefore, filed arbitration proceedings before FOFSA, London on 13.02.1981 and the Appellant was asked to appoint an Arbitrator within 21 days. Vide Telex dated 18.02.1981, the Respondent requested the Appellant to send originals of the Government’s notices banning the exports to the Respondents, which was sent by the Appellant on 23.02.1981. On the same day. the Appellant also requested the Respondent to send a copy of the FOSFA Arbitration Rules, which were sent by the Respondent on 24.02.01981. On 05.03.1981 the Appellant asked for an extension in appointment of arbitration beyond the period of 21 days and this was request was honoured on 10.03.1981. 

On 19.03.1981 the Appellant filed a petition bearing OMP No. 41 of 1981 against the Respondent and their Arbitrators before the Delhi High Court praying to restrain such arbitration proceedings as the agreement did not contain any specific arbitration clause. Accordingly, vide order dated 20.03.1981 the arbitration proceedings were stayed till 22.04.1981 by the Delhi High Court. This order was intimated to the Respondent on 23.03.1981 by the Appellant.

In disregard   of   the   order   of   interim   stay   granted   on 20.3.1981 by the High Court, the FOSFA by its telex requested the Appellant to appoint an Arbitrator on its behalf by 20.04.1981, failing which FOSFA would appoint an arbitrator on behalf of the Appellant. Through a telex message on 09.04.1981, the Appellant informed the Respondent and FOSFA that   it   had   no   jurisdiction   to   proceed   with   the arbitration in view of the order of stay by the Delhi High Court and any action taken by the Respondent. or by Mr. Scott of FOSFA would be illegal and void.

On 22.04.1981, the Delhi High Court adjourned the matter and extended the interim relief granted to the Appellant till 21.07.1981. However, in disregard of the order passed by the High Court, FOSFA appointed Mr. F.A.D. Ralfe as an Arbitrator on behalf of the Appellant on 23.4.1981. Thus, the Appellant urged that it was deprived of the right to appoint its nominee Arbitrator and vide its letter dated 1.5.1981 informed FOSFA that despite the order of stay by the High Court, perverse steps were taken to appoint the Arbitrator on its behalf and it was further stated that the counsel appearing for the Respondent stated   in   the   High Court that the Respondent would not proceed further in the arbitration. Ultimately, the Appellant  filed proceedings in the nature of contempt on 30.10.1981 on the ground that appointment of Arbitrator on behalf of the Appellant violated the orders dated 20.3.1981 and 22.4.1981, passed by the Delhi High Court.

On 11.012.1981 the Delhi High Court held in OMP No. 41 of 1981 that the first agreement would be governed by the arbitration agreement incorporated in FOFSA 20 Contract while there was no arbitration agreement between the parties in so far as the second agreement was concerned. Resultantly, on 22.03.1982, the Respondent filed filed FAO (OS) No.24 of 1982 against the order dated 11.12.1981 and the same was later withdrawn. 

On 01.04.1982 the Respondent filed a Special Leave Petition which was numbered as Civil Appeal No.1755 as against the order dated 11.12.1981 of the Delhi High Court. On 30.04.1982 the Supreme Court passed an order restraining the Respondent and FOSFA to proceed further in the Arbitration. On 04.05.1982, FOSFA sent a telex that the Supreme Court had no power to act in the matter nor to stay the arbitration  and continued with the proceedings in violation of the order passed by the Supreme Court.

Vide order dated 09.01.1987 the Supreme Court upheld the decision of the Delhi High Court dated 11.12.1981 and relegated the parties to arbitration for the first agreement and to civil proceedings for the second agreement since there was no arbitration clause in the second agreement. Accordingly, the Appellant filed its written submission before the FOSFA on 10.01.1989 while pointing out that it was not allowed to appoint its Arbitrator despite specific order of restraint by the Delhi High Court and it was not allowed to be represented through its Counsel. The Respondent also filed additional written submissions before FOFSA on 19.06.1989. 

On 15.11.1989, FOFSA passed an award directing the Appellant to pay a sum of USD 4,681,000 being the difference between the contract price of USD 765 PMT plus USD 15 PMT for double bags and the settlement price of USD 2275 per metric tonnes plus USD 15 per metric tonnes for double bags as damages. The Appellant was ordered to pay interest @ 10.5% per annum from 13.02.1981 till the date of the award.

On 16.01.1990 the Appellant filed an appeal against the award dated 15.11.1989 before the Board of Appeal (‘the Board’) and several requests were made by the Appellant to be represented  by their solicitors since there were special circumstances and Indian Law was required  to be explained. However, these requests were not accepted by the Board on 14.05.1990. 

On 14.09.1990 Board enhanced the award against the Appellant while deciding the Appeal and the Respondent filed no appeal. The Appellant was directed to pay interest @ 11.25% per annum instead of 10.5% per annum. The Arbitrator   nominee   of   the Respondent who passed the original arbitration award represented the case on behalf of Respondent before the Board.

The Respondent thereafter, filed a petition as Suit No.1885 of 1993 under Section 5 and 6 of the Foreign Awards (Recognition and Enforcement) Act, 1961 (“the Foreign Awards Act”) seeking enforcement of award passed by FOFSA and the Board of Appeal. The Single Judge of the Delhi High Court rendered the award to be enforceable vide order dated 28.01.2000.

The Appellant filed an Appeal bearing F.A.O. (O.S) No. 205 before the Division Bench of the Delhi High Court and stayed the execution on 28.02.2001. However, the stay and the order of appointment was questioned before the Supreme Court and the Supreme Court modified the interim order of the Delhi High Court dated 28.02.2001 and disposed of both the petitions in question on 05.05.2000 while passing certain interim orders. 

On 09.09.2002, the Respondent filed an execution petition bearing Execution Petition No. 204 of 2002 seeking execution of the decree dated 28.01.2000 passed in Suit No. 1885 of 1993. The Appeal filed in the Delhi High Court was held to be non-maintainable and was dismissed on 06.09.2010. The Appellant, aggrieved by the said dismissal, filed the present Appeal bearing Civil Appeal No. 667 of 2012 before the Supreme Court for adjudication on merits.

ISSUES BEFORE THE SUPREME COURT

The following issues were considered by the Supreme Court:

OBSERVATION 

The Appellant contended that:

The Respondent, on the contrary, contended that:

The Court while discussing the issues on merits, referred the clauses of the contract and the Government orders of restriction too in order to adjudicate the fairness of the enforcement of the foreign award. The Court observed that;

“…It is apparent that the Government of India issued a direction that was binding upon the NAFED. Without permission, it was not possible for the NAFED to carry out its obligation under the Contract and Addenda.”

The Court referred to the common law doctrine of frustration while relying upon various precedents and held that the contract came to an end in terms of Clause 14 of the Agreement and became void in view of Section 32 of the Indian Contract Act, 1872. As per clause 14 of the Agreement, parties had agreed for a contingent contract and therefore, the situation shall fall under Section 32 of the Indian Contract Act, 1872 and not Section 56. The Supreme Court noted that the Appellant is a canalizing agency of the Government and cannot supply without prior approval of the Government.  The Delhi High Court overlooked that the doctrine of frustration is not under Section 56 of the Indian Contract Act, 1872. The Supreme Court drew precedence from Smt. Sushila Devi and Ors. v. Hari Singh and Ors., (1971) 2 SCC 288 and observed:

“In this case, ‘expected event’ was a refusal by the Government as agreed to under Clause 14 of the Agreement. On the happening of such an event, it is so fundamental as to be regarded by law as striking at the root. As such, we are of the opinion that the contract was rendered void in terms of section 32 of the Contract Act.”

This Bench based reliance on the judgment of this Court in Satyabrata Ghose v. Mugneeram Bangur and Co., (1954) SCR 310, which is the leading precedent on the interpretation of the Doctrine of Frustration as entrusted in the Indian Contract Act, 1872.  This bench interpreted the applicability of Section 32 and not Section 56 of the Indian Contract Act from Satyabrata Ghose whereby applicability of Section 56 has been elaborated as follows:

“… the doctrines of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act. The view that Section 56 applies only to cases of physical impossibility and that where this section is not applicable recourse can be had to the principles of English law on the subject of frustration is not correct. Section 56 of the Indian Contract Act lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. The impossibility contemplated by Section 56 of the Contract Act is not confined to something which is not humanly possible. If the performance of a contract becomes impracticable or useless, having regard to the object and purpose the parties had in view, then it must be held that the performance of the contract has become impossible. But the supervening events should take away the basis of the contract, and it should be of such a character that it strikes at the root of the contract.”

With regard to the aspect of the unenforceability of the award since it was against the public policy of India, the Court placed reliance on Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, whereby this Court opined that the phrase “Public Policy of India” in the Arbitration and Conciliation Act, 1996 under Section 34 (2) (b)

(ii), with respect to domestic awards, should be given a wider meaning. Additionally it was held thereby that illegality goes to the root of the matter, or if the award shocks the conscience of the court, it would be patently illegal. Keeping in mind the various tests that were laid down by the Supreme Court in Saw Pipes, this Court further observed as follows:

“64. The intention of the party should be gathered from the agreement. It was observed that severe procedural defects in the arbitration proceedings might provide enough ground for refusal to uphold the award. In the instant case, we are not on the issue of procedural irregularities while considering the aspect above concerning the public policy; we have to consider the case mainly given Clause 14 of the Agreement.”

CONCLUSION

The Court was satisfied that enforcement of such foreign award shall be against the public policy of India and therefore, the award was denied enforcement. This Court further held that the award could be enforced as per Section 7 (1) (a) (i) of the Foreign Awards Act which protects the parties who are under inability to perform their obligations because of laws applicable or because of invalidity of the agreement.

Thereafter, the Court dealt with the issue of when can an award be declared to be against public policy, leading to several interpretations of the term ‘public policy’ under several decisions. The Court drew precedence from a few judgments in the following manner:

“66. In Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, the Court relied on the decision in Renusagar (supra) for interpreting the expression “public policy.” The court held that the concept of the fundamental policy of Indian Law to mean (1) compliance of the statutes and judicial precedence, (2) need for judicial approach, (3) natural justice compliance, and (4) standards of reasonableness.”

In terms of the terms of the contract between the parties herein and the applicability of Section 32 of the Indian Contract Act, 1872 along with the interpretation of public policy pertaining to the facts of this matter, this Court concluded that:

“68. It is apparent from abovementioned decisions as to enforceability of foreign awards, Clause 14 of FOSFA Agreement and as per the law applicable in India, no export could have taken place without the permission of the Government, and the NAFED was unable to supply, as it did not have any permission in the season 1980-81 to effect the supply, it required the permission of the Government. The matter is such which pertains to the fundamental policy of India and parties were aware of it, and contracted that in such an exigency as provided in clause 14, the Agreement shall be cancelled for the supply which could not be made. It became void under section 32 of the Contract Act on happening of contingency. Thus, it was not open because of the clear terms of the Arbitration Agreement to saddle the liability upon the NAFED to pay damages as the contract became void. There was no permission to export commodity of the previous year in the next season, and then the Government declined permission to NAFED to supply. Thus, it would be against the fundamental public policy of India to enforce such an award, any supply made then would contravene the public policy of India relating to export for which permission of the Government of India was necessary.”

Hence, the Court held that the Appellant could not have been held liable to pay damages under a foreign award and this appeal was allowed. Resultantly, the impugned order of the Delhi High Court was set aside. The Court held as follows:

“80. Resultantly, the award is ex facie illegal, and in contravention of fundamental law, no export without permission of the Government was permissible and without the consent of the Government quota could not have been forwarded to next season. The export without permission would have violated the law, thus, enforcement of such award would be violative  f the public policy of India. On the happening of contingency agreed to by the parties in Clause 14 of the FOSFA Agreement the contract was rendered unenforceable under section 32 of the Contract Act. As such the NAFED could not have been held liable to pay damages under foreign award. 

81. The appeal filed by the NAFED is thus allowed, and the impugned judgment and order passed by the High Court is set aside. Award is held to be unenforceable. No costs. ”

AMLEGALS REMARKS

This judgment has interpreted the applicability of the doctrine of frustration to the merits of the case in terms of Section 32 and not Section 56 of the Indian Contract Act, 1872 by seeking guidance from several landmark judgements that have settled the law pertaining to the applicability of this doctrine to contracts in India. 

The other important aspect of this judgment is that the Court refused the enforcement of a foreign award on the ground that such an award was against the public policy of India and further went on to extensively discuss the applicability and interpretation of public policy,  based on the merits of the case.

The Supreme Court has in the instant case, tried to go against the pro-enforcement stance taken by most of the precedents for example, Ssanyong Engineering & Construction Co. Ltd. v. National Highways Authority of India (NHAI), (2019) 8 SCALE 41, Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp. (1) SCC 644 or even the recent case of Vijay Karia & Ors. v. Prysmian Cavi E Sistemi SRL (Civil Appeal No. 1544 of 2020). 

The Courts in India while moving towards a pro-arbitration age with minimal judicial intervention, have consistently discouraged mention and arguments on merits of the case when the award is before the Bench for enforcement. Questioning of the arbitrator’s interpretation of the agreement while hearing the parties should neither be performed nor be promoted by the Courts in India.

The Supreme Court ruled against the case of Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp. (1) SCC 644 and held:

“66. Article V(2)(b) of the New York Convention of 1958 and Section 7(1)(b)(ii) of the Foreign Awards Act do not postulate refusal of recognition and enforcement of a foreign award on the ground that it is contrary to the law of the country of enforcement and the ground of challenge is confined to the recognition and enforcement being contrary to the public policy of the country in which the award is set to be enforced. There is nothing to indicate that the expression “public policy” in Article V(2)(b) of the New York Convention and Section 7(1)(b)(ii) of the Foreign Awards Act is not used in the same sense in which it was used in Article I(c) of the Geneva Convention of 1927 and Section 7(1) of the Protocol and Convention Act of 1937.”

This decision of the Supreme Court shall raise multiple questions with respect to India being an appropriate seat of arbitration. This decision might also create legal hurdles in interpretation of public policy and enforcement of foreign awards under the Act.

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AMLEGALS is a specialised Corporate Law Firm. They advise, handle litigation & render non-litigation services. Their specialised areas of practice are in Arbitration, Goods & Services Tax (GST), Insolvency & Bankruptcy Code (IBC), Contracts & Agreements, IPR & Corporate Laws. AMLEGALS has offices in Ahmedabad, Mumbai, Kolkata & New Delhi to handle matters in High Courts, NCLT, NCLAT, CESTAT, VAT Tribunal, Income Tax Tribunals, Advance Ruling in GST, DRT & Arbitral Tribunals.  

Recently the Government of India through the Ministry of Finance has announced that the Insolvency & Bankruptcy Code (“IBC”) proceedings under Section 7, 9 and 10 would be suspended for a period of 6 months and no new proceedings can be filed under these Sections. A new Section 10A is expected to be inserted in the IBC which will bring the suspension into effect.

This is being done in light of the announcement made by the Union Finance Minister Nirmala Sitharaman on March 24^th while increasing the threshold limit of minimum debt amount from Rs. 1 lakh to Rs. 1 crore. She was quoted as saying that the Government wished to review the situation after March 30^th and if deemed necessary, these relevant provisions of the IBC would be suspended for a period of 6 months at least.

This decision has obviously being taken in light of the COVID – 19 Pandemic to ensure that the due to the financial stress that the companies are already facing, they are not into insolvency with no turning back. 

This decision has also stemmed from the increasing pressure of insolvency against companies, especially MSMEs. This added with the fact that no new buyers or financial investors would be willing to invest for the successful insolvency resolution of the distressed companies which would inevitably lead them into liquidation.

This is being brought in as a one-time measure, initially for the period of only 6 months. The Government has also emphasized if need be, the Section 10A would be further extended for a period of 6 months and that this Section 10A would not be in force for a period of more than 1 year from the date of its insertion.

The major concern and impact that would be seen is on the debt restructuring of the companies during and after the Pandemic. It is no secret that even the biggest of giants are in a financial turmoil right now and the smaller companies are the ones that are taking the biggest hit. 

Therefore, most of them would have been looking at some sort of a resolution plan to keep them as a going concern had insolvency proceedings been initiated against them. Similarly, a lot of stressed companies would have been looking for Debt Restructuring through the provisions of IBC once situation normalized after the Pandemic. 

Similarly, the organizations who have huge credit stuck in others, especially the Operational Creditors, and do not have the financial viability to continue will also be ultimately forced into liquidation. With IBC provisions still in place, they could have resorted to recovering their debts in a more time bound and efficient manner. Hence, this suspension has gone against the very idea of introducing IBC in the first place, i.e. keeping the company as a going concern.

For Financial Creditors such as the banks and financial institutions, the RBI had already imposed a moratorium of 3 months on the recovery of loan and therefore, the suspension of Section 7 has now come as a two edged sword. These financial institutions are now facing stress on their balance sheets, which they may or may not be able to survive.

Though a notification is awaited to this effect but a blanket suspension of the IBC provisions has raised many eyebrows not just in India but also from the Creditors abroad. Though the companies whose creditor list was increasing by the day may take a sigh of relief, this suspension may also hamper the foreign companies investing in India as they would be afraid of not having a proper recourse mechanism for recovery of their debts and/or resolution of companies which are financially stressed.

It is often being aired that instead of resorting to a blanket suspension, the model followed by Australia could have been followed and apart from increasing the minimum threshold limit and providing temporary relief to financially stressed business and individuals.

It is not an alien fact that almost 50% of the applications in the NCLT are for a debt of below Rs 1 Crore. Since the threshold limit was already increased to Rs. 1 Crore by the MCA notification dated 24.03.2020, another mechanism to combat the issue of insolvency could have been to carve out specified exceptions rather than a blanket suspension.

One more change that the Government could have brought in instead of a blanket suspension is to increase the time period in Section 8 from 10 days to may be 3 months or more. This would have given a corporate debtor more time to reply to the operational creditor and handle his finances and pay of the debt rather than a sword hanging over his head of immediate action by the operational creditor under Section 9.

There is a dire need to revisit the suspended provisions of voluntary insolvency under Section 10 otherwise it would only leave an already stressed operational creditor without any recourse of keeping itself a going concern. Any delay in pushing the company into insolvency may also affect the market value of the assets especially since this Pandemic has already lowered the buying and investing power of corporations.

Restructuring exercise post COVID-19 can be a business saving mantra for many businesses so that they can retain better color in their balance sheet rather than falling to the tune of the times and increasing the red side.

Therefore, going by the global clues in insolvency during the COVID-19 times, a better mechanism towards damage control exercise would be that the Government amends this blanket suspension and instead resorts to bringing in changes in the procedural aspects or increasing time limits under the Act and even providing monetary relief to stressed businesses. This would create a balance between the different creditors and debtors that IBC has for so long strived to achieve.

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AMLEGALS is a specialised Corporate Law Firm. They advise, handle litigation & render non-litigation services. Their specialised areas of practice are in Arbitration, Goods & Services Tax (GST), Insolvency & Bankruptcy Code (IBC), Contracts & Agreements, IPR & Corporate Laws. AMLEGALS has offices in Ahmedabad, Mumbai, Kolkata & New Delhi to handle matters in High Courts, NCLT, NCLAT, CESTAT, VAT Tribunal, Income Tax Tribunals, Advance Ruling in GST, DRT & Arbitral Tribunals.  

The pandemic crisis of Covid-19 has brought legal professionals on their toes to assess the risk and guide business houses as to how to be in a damage control mode.

The assessment would revolve around pre-Covid-19, during Covid-19 and post Covid-19 stages since, at present, if the implications are not anticipated correctly, it can invite unforeseen & huge liabilities.

The broader concept of pandemic legal intelligence for any business requires a holistic view for employees, customers, Government compliances, liabilities, settlements, declarations, finance, obligations, etc.

In order to understand the best practices under pandemic legal intelligence, some of the major heads are dealt with in this white paper.

Contractual Obligations

The first impact is on every contractual obligation. It’s high time to revisit the wordings and expressions deployed in the body of the contract. Our advise to our clients is to pay special attention to the force majeure clause read with other clauses advocating for delay, disruption, damages, penalty, etc.

A conclusion on the impact of non-performance which results into penalty and damages for non-performance so that the liability can be assessed and corrective measures can be taken in time.

The Force majeure clause in the contract needs to be understood with the events leading to it and suitable actions should be initiated to invoke or defend in a suitable manner. Our Covid Part-I released on 1st March, 2020 deals with it in an exhaustive manner.

The timing of invoking actions and safeguarding interests with the inbuilt clauses requires a perfect pandemic legal intelligence. There are various smart areas which can be worked upon and a strategy can be deployed to contain various liabilities.

Employment Concerns

The biggest challenge which the companies are facing during the pandemic era, especially when country wide lockouts have been declared, is contractual obligations between the employees and the employers. The deliverable aspects of employees’ and employer’s financial obligation is the bedrock of the concern.

The contractual workmen further add woes to this in as much as such workers at factory level are in thousands or lakhs for companies having operations at different plants in India. The notification issued under Disaster Management Act, 2005 has created various new repercussions and new legal twists.

The white collar employees have to be further suitably instructed with a new drawn module for working from home with restriction and policies of reporting to their employer as well.

The social media conduct policy is another area where the employers are worried since they have no control on the manner of usage of net and the online behaviour of the employees while they are working from home.

Recently, an employee of a global IT company was fired by their employer due to restrictive postings on social media. We have advised our clients for social media policies in lieu of directive of the Government to not spread rumors about Covid-19.

It is also incumbent upon the employer to take care of its employees during such time especially when employees are working from home. Proper guidelines should be in place for reporting any disease and particularly about Covid-19.

If any employee suffer from the same then it should be reported to the employer as being social responsibility of the employers to guide their employees so that they also don’t spread such disease in community at large.

Ensuring medical policies of employees are in operation is also a concern where companies should work and HR department should play a pivotal role.

Insurance Implications

It is equally significant for every company to assess their claims and losses arising during the Covid-19 phase.

This has to be meticulously assessed as various unforeseen claims and losses can erupt over the time. A meticulous approach be adopted so that the requirement is not only strictly complied with but also timely actions are initiated so that the interest of the company is safeguarded.

The insurance policies should be closely revisited with respect to its specific terms, conditions and provisions in its entirety.The implications under various IRDAI notifications need to be properly assessed and understood.

The implications with respect to import and export orders should be also weighted for while assessing the claims and losses at any given point of time. A well informed decision and timely action coupled with conversant implications under the IRDA Act and Rules made thereunder can be a game changer.

Damage Control

Damage Control is the most crucial and integral part of the Pandemic Legal intelligence. Sometimes, a simple communication on e-mail can save unforeseen liabilities and act as a damage control exercise.

When things are uncertain like as prevailing during Covid-19, it is advisable to communicate on regular basis wherever any untoward incident seems to be occurring or may be triggered.

We have had experienced over the years that an email communication can do wonders including a dispute wherein it prevented a sure short damage claim getting substantiated in an international arbitration.

Never miss small things as they matter the most when it comes to damage control.

In other words, the simplest tool for damage control is simple communication and choosing your words very carefully.

Regulatory Watch & Compliances

It is imperative upon the in-house counsels and lawyers to keep watch over the developments and declarations made by various regulatory bodies, from time to time.

It will help to take an informed decision and review can be carried out by senior management of corporate affairs, legal and risk management in order to implement various functions.

Even though the compliances have been deferred by way of relaxations and reliefs by various Government agencies but still it is advisable that to the extent possible to keep a close track of the compliances and internally it should be worked upon so that such deferment does not result into failure of accountability at a later stage.

It should be always kept in the mind that employees are working from home and hence, many documents may not be in place or have got to be traced at a later date when the compliances will have to be made on the stipulated date.

We advise to keep a dedicated small team to work on this, on a regular basis, so that communication and internal process are in place to tackle such issues on any single day.

The day to day directives by regulatory bodies should be screened on a daily basis and stored properly to act upon it suitably.

Litigation Probability

It’s time to realise that companies are heading towards a new series of pandemic litigation!

Every company may be having hundreds of commercial litigation but would have no litigation cropping up during the pandemic business cycle.

We anticipate that the post pandemic Covid-19 could also bring a pandemic litigation as the business cycles of every industry has been badly hit.

We are going to cover exhaustively on litigation probability under the Legal Intelligence Series-Covid | Part-4

Have you included correct factors while carrying out risk assessment under Pandemic Legal Intelligence?

Time to realise that the unforeseen legal implications can be at par with the nature of COVID-19.

Pandemic Legal Factors

The crucial factors need to be identified and addressed in the most effective manner during the pandemic crisis.

The broader picture may be the same but the intrinsic factors may vary from industry to industry. The pandemic era can add disputes and liabilities for your company, are you really prepared?

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AMLEGALS is a specialised Corporate Law Firm. They advise, handle litigation & render non-litigation services. Their specialised areas of practice are in Arbitration, Goods & Services Tax (GST), Insolvency & Bankruptcy Code (IBC), Contracts & Agreements, IPR & Corporate Laws. AMLEGALS has offices in Ahmedabad, Mumbai, Kolkata & New Delhi to handle matters in High Courts, NCLT, NCLAT, CESTAT, VAT Tribunal, Income Tax Tribunals, Advance Ruling in GST, DRT & Arbitral Tribunals.  

A. MEANING OF FORCE MAJEURE

What is Force Majeure?

The term ‘Force Majeure’ is a Latin term which essentially translates into superior force in English or an act of God. In business (and legal contracts) it means those uncontrollable events (such as war, labour stoppages, or extreme weather) that are not the fault of any party and that make it difficult or impossible to carry out normal business. For example, a company may insert a force majeure clause into a contract to absolve itself from liability in the event it cannot fulfil the terms of a contract (or if attempting to do so will result in loss or damage of goods) for reasons beyond its control.

In India, Force Majeure is not defined in any of the statute however, the Indian Contract Act 1872 (the “Act”) allows that any agreement which is impossible to perform would be void. The first paragraph of section 56 of the Act states that “an agreement to an act impossible in itself is void”. The second paragraph of section 56 of the Act states that “A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.” 

The first paragraph mentioned above lays down a simple principle of initial impossibility and the second paragraph lays down the effect of subsequent impossibility. Sometimes, the performance of a contract is possible when the contract is made but becomes impossible or unlawful upon happening of an event which could not have been prevented. The above doctrine is called the Doctrine of Frustration which is an English law doctrine which essentially lays a positive rule relating to frustration. There can be no agreement on altered circumstances.

The alternation of circumstances must be such as to upset altogether the purpose of the contract. A situation may be classified as a commercial hardship and may make the performance unprofitable or more expensive but is not sufficient to excuse the performance as it does not fundamentally change the situation as to frustrate the contract. This doctrine of frustration or impossibility shall not apply to a situation so as to excuse the performance but where the performance is practically cut off. Change of circumstances is a valid ground for a contract to get frustrated. In P.D. Mehra v Ram Chand Om Prakash [AIR 1952 Punj 34], it was observed that if there are unanticipated change of circumstance, it will have to be considered whether this change of circumstances has affected the performance of the contract to such an extent as to make it virtually impossible or extremely difficult. It was held in Satyabrata Ghose v. Mugneeram Bangur & Co. [1954 SCR 310] that that the word “impossible” has not been used in the Section in the sense of physical or literal impossibility. The performance of an act may not be literally impossible, but it may be impracticable and useless from the point of view of the object and purpose of the parties. If an untoward event or change of circumstance totally upsets the very foundation upon which the parties entered their agreement, it can be said that the promisor finds it impossible to do the act which he had promised to do.

The application of force majeure has again been elaborately explained by the Supreme Court in the case of Energy Watchdog v CERC and Others [(2017) 14 SCC 80].

B. SCOPE OF FORCE MAJEURE CLAUSE

A force majeure provision may set out an exhaustive list of events or circumstances that constitute events of force majeure. Commonly listed items are occurrences such as adverse weather conditions, explosions, fire, acts of God and other natural catastrophes. It is not clear whether in the selection of the above descriptions of events or circumstances, the outbreak of COVID-19, which is a biological entity that can cause an infectious disease, would fall within the contemplated use of the provision.

The concept of force majeure is wide enough to accommodate man-made interventions such as wars, blockades, strikes and legislative and executive interference and can even be extended on account of changes in law, economic hardship, and accidental damage to specified facility.

Alternatively, a force majeure provision may set out an inclusive list that recites several events or circumstances for the purposes of illustration only, with a catch-all provision that force majeure relief will also be extended on account of any other event unless that other event is specifically named in a list of excluded items.

In any event, the interpretive rule of ejusdem generis – that when a list of specific items belonging to the same class is followed by general words, the general words are to be treated as confined to other items of the same class – will be used to determine contractual intention.

A force majeure provision may exclude outright certain events such as changes in either party’s market factors, a party’s inability to finance its obligations under the agreement or the unavailability of funds to pay amounts when due, breakdown or failure of plant or equipment caused by normal wear and tear or by a failure to properly maintain such plant or equipment from constituting events of force majeure.

Occasionally, events that are carved out of force majeure can be brought back within its fold if those events were themselves the consequence of an event of force majeure. For example, in some PPAs in the solar power sector in India, the unavailability or late delivery of equipment, although not an event of force majeure by itself, may constitute an event of force majeure if it was the consequence of an event of force majeure.

Force majeure related language used in most contracts vary widely and, therefore, it is important to review these clauses carefully. Some contracts list specific examples of force majeure events that automatically meet the standard upon the happening of such event, while others rely on generic language usually included in such force majeure clauses. 

A force majeure clause cannot be implied under Indian law. It must be expressly provided for under the contract and protection afforded will depend on the language of the clause. In the event of a dispute as to the scope of the clause, the courts are likely to apply the usual principles of contractual interpretation.

A COVID-19 pandemic could make it more difficult for parties to perform their contractual obligations. There are two possible instances, which may suggest that a force majeure clause covers a pandemic: (a) if the contractual definition of a force majeure event expressly includes a pandemic. Inclusion of pandemic to the list of force majeure events will provide clarity as to whether COVID-19 outbreak would trigger a force majeure clause in a contract; or (b) if the force majeure clause covers extraordinary events or circumstances beyond the reasonable control of the parties. Such general, catch-all wording may be invoked if it is determined that the factual circumstances caused by the pandemic are beyond reasonable control of the affected party. Having said that, whether a party can be excused from a contract on account of COVID-19 being declared a pandemic is a fact-specific determination that will depend on the nature of the party’s obligations and the specific terms of the contract.

The party claiming force majeure is usually under a duty to show that it has taken all reasonable endeavours to avoid or mitigate the event and its effects. This is a subjective standard and will be interpreted on a case-to-case basis. The force majeure event or circumstance must be causative to the contractual breach and a party claiming force majeure is typically required to establish that it was the force majeure event (and not some other factor) that caused the party to be unable to fulfil its contractual obligations.

Force majeure clauses commonly contain a prompt and time bound notification requirement, which can operate as a contractual condition precedent to relief or not. Such provisions are generally enforceable, and so complying fully with all notice requirements will be important for parties seeking to invoke force majeure. Courts place the burden on the party asserting force majeure defence to demonstrate the existence of force majeure. Such clauses are construed strictly by the courts. 

Effect on Contract 

The language of the force majeure clause will determine the remedies available to the parties.

Some contracts may provide for immediate termination of the contract upon the happening of the force majeure event. Others may provide that the contract will be put on hold until the force majeure event is resolved. Some contracts may provide for limitations in time after which either party may terminate the agreement with written notice to the other (i.e. if non-performance caused by the event is prolonged or permanent). Others may require the contract to remain in effect until the force majeure event is resolved. Some contracts will only allow for certain obligations to be suspended.

[Source: https://corporate.cyrilamarchandblogs.com/2020/03/covid-19-officially-a-pandemic-faqs-coronavirus/] 

In particular, the following aspects should be kept in mind: 

a. The general concept means that events or conditions beyond the reasonable control of one party should not cause them to be held liable under the terms if that event or condition prevents the performance of the obligations of the contract. Some contracts list examples of force majeure events that automatically meet the standard. Others list events that must still meet the definition of force majeure. One may also rely on generic clauses usually included in force majeure clauses, such that the COVID-19 is an ‘Act of God’.

b. Force majeure provisions vary widely – The language used in most contracts vary widely and, therefore, it is important to review these clauses carefully. 

c. Duty to mitigate and exercise reasonable diligence? – If a ‘duty to mitigate’ obligation is imposed under the contract, then the meaning of ‘reasonable diligence’ becomes important. This is a subjective standard and will be interpreted on a case-to-case basis. It also needs to be analysed if there are any obligations to use ‘best endeavours’ to mitigate the effects of a force majeure event.

d. Does the event have to be foreseeable? – Most contracts provide that for an event to qualify as force majeure, it must be unforeseeable or not reasonably foreseeable. 

e. Notification requirements – Most contracts require notice to the other party to invoke a force majeure provision. Some also provide deadlines for making such notice to make the claim effective.

f. Can the contract be put on hold or cancelled? – Some contracts provide that it can be put on hold until the force majeure event is resolved. Some contracts provide for limitations in time after which either party may cancel the agreement with written notice to the other. Others require the contract to remain in effect until the force majeure event is resolved.

g. Burden of proof – The party that relies upon the force majeure event generally has the burden of proof and such clauses are construed strictly by the courts. 

h. Keep records – Copies of critical correspondence and other communications should be maintained if disputes arise later. This can be particularly important in establishing that the company has done all that was reasonably possible to mitigate the losses. 

An Anticipatory Breach

A party that demonstrates its intent not to perform under a contract can cause an anticipatory breach of contract which would excuse the other party from its own performance obligations. 

For this reason, in addition to considering its own ability to perform, a party should consider whether its counterparties can and/or will meet their obligations under the contract.

Insurance and Indemnity Agreements

Companies should evaluate which insurance rights might cover losses arising out of a party’s inability to meet its contractual obligations. Depending on the policy and specific facts, business interruption insurance policies may provide coverage.

Indemnity rights under contracts may provide relief from claims arising from commercial disruptions.

Notice and Communications to Counterparties

Parties considering any of the above issues should carefully review the notice requirements in their agreements. Failure to comply with formal notice requirements—which may require prompt notice and regular updates—can prejudice a party’s ability to excuse non-performance or secure indemnification.

Beyond the strict letter of an agreement, early communication with counterparties may help avoid disputes and promote coordinated solutions.

Organizations facing the possibility that they will be unable to perform under existing contracts, or facing the risk of non-performance by counterparties, will need to proactively and promptly review relevant contracts, and recognize that early communication may be critical. And companies not currently negotiating agreements should consider whether to include provisions expressly allocating and mitigating the commercial risks from COVID-19.

Termination of the Agreement

A standard force majeure clause provides for termination of the agreement if the force majeure event continues for a specific period of time.

If a party serves an initial notice reporting their inability to perform the obligations under an agreement due to an onset of force majeure, then the party can terminate the agreement by serving another notice, in case the force majeure event continues. The Termination clause will not be a risk to the party and the party will be suitably compensated for the work already done.

In addition to the above, the parties may consider invoking other contractual clauses to limit or exclude liability for non-performance – such as price adjustment clauses, material adverse change clauses, or limitation or exclusion clauses. The ability to invoke such clauses will depend on the wording of the relevant clauses and how they are construed by courts.

Furthermore, companies should also consider the ramifications of non-performance clauses under the agreement, such as liquidated damages clauses and penalty clauses under which the extent of non-performance has been predetermined and agreed by the parties.

SCOPE OF FORCE MAJEURE CLAUSE 

A force majeure clause could either include very specific events such as fire, explosions, wars, strikes, legislative and executive interference or generic terms such as any event beyond the reasonable control of the parties or act of God or economic hardship. Such clauses save the performing party from the consequences of non-performance of its contractual obligations. However, the courts may apply the rule of ejusdem generis to determine the contractual intention which rule presumes that a general term following a specific term would be confined to the same meaning as the preceding specific terms.  

Certain events may be specifically excluded as force majeure such as market factors, party’s inability to finance its obligations under the contract, lack of funds to meet the payment obligations or breakdown or failure of plant or equipment. At the same time, events may also be brought within the fold of force majeure if such events were themselves consequences of a force majeure event. Therefore, it is essential to review a force majeure clause and its consequences judiciously and with caution.  

It is important to bear in mind that a force majeure clause is not and cannot be implied under Indian law. It has to be expressly provided under the contract and accordingly the consequences would follow. 

While the outbreak of the COVID-19 (declared a pandemic by the World Health Organisation on 11.03.2020) along with the lockdown may have impeded parties from performing their obligations under a contract, it cannot be said that COVID-19 would qualify as force majeure in every case. There may be a force majeure clause which specifically mentions the words ‘pandemic’ or ‘epidemic’ which would bring COVID-19 within its ambit or could use terms such as ‘regulation or law of the legislature or any statutory authority’ which could cover the decision of the lockdown imposed. 

The bone of contention would be a general force majeure clause (similar to one discussed above) where it would have to be seen whether the consequences / events caused by the pandemic (including the restrictions imposed by the nationwide lockdown) were beyond the reasonable control of the party claiming the benefit of force majeure. Therefore, in the present circumstances, exemption from performance of contractual obligations would depend on the wording of the force majeure clause including the consequences that would flow from invoking the force majeure clause as also the nature of obligations enshrined in the contract.

CLAIMING THE BENEFIT OF FORCE MAJEURE

The party claiming the benefit of force majeure is under a duty to show that all reasonable steps to avoid or mitigate the event and its consequences have been taken. The said party also has to show that there is a causative link to the contractual breach which means that it is on account of a force majeure event (and not otherwise) that a party is not in a position to perform its end of the bargain under a contract. Consequently, the party claiming the benefit would have to show that it would have been able to perform its obligations but for the force majeure event and that it was the force majeure event alone which was enough to cause hindrance to performance of the contractual obligations. 

What has to be analysed on a case-to-case basis is whether the contractual obligations could have been accomplished despite the disruptions caused by COVID-19. In this process, it is essential to ensure that parties do not use COVID-19 and the lockdown as a blanket to camouflage a contractual breach that would have occurred irrespective of the occurrence of such events. For instance, where a building was to be completed by January 2020 or February 2020 and has been delayed due to the fault of either the developer or the allottee, the benefit of force majeure may not available to either party since both COVID-19 and the nationwide lockdown would have no bearing on the delay. Besides this, the requirements of sending a prompt notice (unless the contract provides for a specific period within which the notice must be issued) should also be borne in mind in order to claim this benefit since failure to observe the same could affect a party’s ability to claim exemption from performance of contractual obligations.  

INVOCATION OF FORCE MAJEURE: EFFECT ON CONTRACT

Most contracts usually provide for the consequences of invocation of force majeure clause such as the immediate termination of the contract itself or may provide termination as an option if the force majeure event is prolonged leading to continued non-performance; suspension of either all/some contractual obligations for the duration of the force majeure event; or may provide complete immunity to the party from performing any contractual obligation. 

REAL ESTATE SECTOR: COVID-19, NATIONWIDE LOCKDOWN AND FORCE MAJEURE 

COVID-19 coupled with the nationwide lockdown has led to an unprecedented crisis which has impacted the global economy and has led to disruption in the steady flow of revenue and income across sectors. The present circumstances have aggravated the fate of an already distressed sector with restrictions such as suspension of construction activities, non-availability of man-power or raw materials. While this crisis persists, there is a growing ambiguity as to whether force majeure can be used to exempt parties from their financial obligations under different contracts such as lease agreements or apartment buyer agreements. 

The Real Estate (Regulation and Development) Act, 2016 only refers to force majeure under Section 6 wherein the registration granted under Section 5 may be extended by the authority due to force majeure. However, the definition of force majeure under Section 6 does not specifically include an epidemic or pandemic within its ambit. While associations such as Confederation of Real Estate Developers Association of India (CREDAI) has proposed inclusion of COVID-19 within the realm of this Act, the Maharashtra Real Estate Authority has already taken a step in this direction and provided that “For all registered projects where the completion date/revised completion date/extended completion date expires on or after 15^th March 2020, the period of validity for registration of such projects has been extended by three months and project registration certificates with revised timelines for such projects would be issued subsequently. Further, the time limit of all statutory compliances in accordance with RERA due in March, April and May have been extended to 30th June 2020”. 

Lease Agreements: Obligation to pay rent amid COVID-19 

In an attempt to contain the spread of COVID-19 in India, all commercial establishments, malls, shops etc. have been closed which has led to suspension of all business activities. Consequently, there is either negligible or zero income for the tenants of such establishments who are now overwhelmed with the obligation to pay rent under their lease agreements while scrambling to take care of their employees, staff and personal expenses that continue even during the lockdown. 

Payment of rent in the presence of the force majeure clause:

Exemption from payment of rent under an agreement because of COVID-19 and the lockdown would be available only if such a relief has been explicitly included in the force majeure clause or any other clause under the lease agreement. Waiver of rent is usually available to a tenant on account of damage to or destruction of the premises leading to its unavailability for use. Therefore, the wordings of the force majeure clause have to be carefully evaluated and waiver of rent cannot be claimed as a matter of right, unless specifically provided under the agreement. In the event, the agreement allows suspension of rent or payment of money (without additional qualifications) due to a force majeure event, the concerned party should invoke the said clause and intimate its counter-party at the earliest. 

In case of a general force majeure clause, a tenant may argue that because of the pandemic and the lockdown, it has been unable to use and occupy the premises or that due to lack of business / generation of revenue/income it cannot pay rent. In doing so, the tenant may claim waiver of rent by attempting to bring the present circumstances within the ambit of force majeure. This argument may not be tenable in as much as COVID-19 coupled with the lockdown has only led to a temporary closure of premises as opposed to rendering the premises permanently unfit for use and occupation. Further, rent under a lease agreement is payable towards the exclusive use and possession of the premises as opposed to the ability of the tenant to operate the establishment or the health of the business or actually occupying the premises. Even during the lockdown, the premises continue to be in possession of the tenant and there is no suspension of these rights. Unless specifically stated in the agreement and subject to the nature of the contract, the inability to conduct business and generate revenue cannot be claimed to seek waiver of rent. A commercial difficulty or onerous condition cannot be taken as a ground to avoid performance of contractual obligations [See Alopi Parshad & Sons Ltd. v. Union of India AIR 1960 SC 588]. Similarly, tenants of residential premises may cite financial inconvenience to seek waiver of rent, however, in such cases a lot would depend on the wording of the force majeure clause.

Payment of rent in the absence of force majeure clause:

In the absence of such clauses, it is doubtful that a tenant can fall back on the doctrine of frustration of contract (which eventually leads to termination of the contract) and seek waiver of rent. In the case of Raja Dhruv Dev Case in T. Lakshmipathi and Ors. vs. P. Nithyananda Reddy and Ors. [AIR (2003) SC 2427] it was held that the doctrine of frustration is not applicable when the rights and obligations of parties arise under a transfer of property such as a lease. 

However, if an untoward event or change of circumstance upsets the very foundation upon which the parties entered into the agreement, the contract can be held to be frustrated under Section 56 of the Indian Contract Act, 1872. [See Energy Watchdog vs Central Electricity Regulatory Commission and Ors. (2017) 14 SCC 80]. 

The doctrine of frustration of contract under Section 56 of the Contract Act, 1872 triggers only when performance is absolutely impossible and the contract automatically comes to an end from the date of impossibility. In the present circumstances, the parties will have to assess and decide whether COVID-19 together with the lockdown has destroyed the object and purpose of their contract or has altered the contract entirely beyond foresight. This doctrine involves the discharge of the contract by reason of supervening impossibility or illegality which was beyond the contemplation the parties at the time when they entered into the contract. [See Satyabrata Ghose v. Mugneeram Bangur & Co. and Another, AIR 1954 SC 44: 1954 SCR 310]

On the other hand, when an event of force majeure/irresistible force takes place, Section 108(B)(e) of the Transfer of Property Act, 1882 provides the tenant with an opportunity to determine if an event under the said Section has permanently affected his ability to use the premises. Section 108(B)(e) of the provides that “if by fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void …”. If so, the law imposes a strict obligation on the tenant to give a notice under Section 108(B)(e) of the Act, 1882 to the landlord. If the tenant fails to give such notice, the lease is deemed to remain unaffected regardless of a force majeure event. Once such a notice is sent, the lease stands terminated. A tenant can only seek the benefit of Section 108(B)(e) if the lease is duly registered under the Registration Act, 1908. In the absence of registration, tenants may have to examine their protection under common law for a month to month tenancy. 

Therefore, under Section 108(B)(e) of the Transfer of Property Act, 1882, it would be important to establish that COVID-19 is an instance of ‘irresistible force’ and has also rendered the property permanently unfit for the purpose for which it was leased out. However, it is unlikely that Section 108(B)(e) of the Act, 1882 would apply in the present situation in as much as COVID-19 coupled with the lockdown has not permanently affected the ability of a tenant to use the leased premises. [See Shankar Prasad & Ors. v. State of M.P. & Ors. [ILR (2013) MP 2146]. Further, this notice must be issued only after due caution since the effect of the same would be termination of the contract. 

On March 29, 2020, the Ministry of Home Affairs inter alia ordered waiver of rent for labourers, migrant workers and students by landlords for a period of one month. However, in the absence of any similar order/notification for commercial leases or force majeure clause or any clause allowing suspension of rent or payment obligations during force majeure, tenants of commercial establishments may have to resort to cordial negotiations with their landlords and may also consider deferment of rent during this period. While issuing such notification/order, the Government must bear in mind that there are many who rely on rent from the tenant for sustenance and do not have any alternative source of income. 

Even through the lockdown, tenants have not been deprived of the possession of the premises and the obligation to pay rent has not extinguished by mere non-use or non-occupation of the premises (unless mentioned in the contract). For instance, an analogy could be drawn with the decision of the Government providing for moratorium in payment of EMIs against loans (for whatever purpose it may have been availed) whereby the Government has not waived payment of EMIs; it has only been deferred (which is optional and not compulsory for the customer). Thus, the obligation to pay the EMIs has not been extinguished and it would still be payable. 

Interestingly, the United Kingdom has passed the Coronavirus Act, 2020 which inter alia suspends the ability of a landlord to take an action of forfeiture for business tenancies in England and Wales to protect the business tenants who cannot pay rent. 

Given the uncertainty in this extraordinary crisis and no sight of return to normalcy anytime soon, both parties must carefully review their force majeure clause (if any) and in the absence of such clause, they must consider reaching a middle ground where both parties could bear some loss. However, if there is a dispute on whether the present events qualify as force majeure or there is breach of any contractual obligation or unnecessary / frivolous claims of frustration of contract, the parties may have to seek remedy under their respective dispute resolution clauses provided in the agreement.  

A lot will also unravel as and when different contracts (with or without force majeure clauses) are before courts for determining whether COVID-19 together with the restrictions of the nationwide lockdown can qualify as a force majeure event in a particular case. The courts will also have to carefully review the force majeure clause (if any) to see to what extent can a party be excused from performance of contractual obligations. The application of the doctrine of force majeure and the doctrine of frustration would vary immensely across different sectors. While the fate of existing contracts remains to be explored; going forward the outbreak of a pandemic and the extent of restrictions that may be imposed to contain its spread will change the way clauses are framed in a contract and maybe also modify the existing laws to secure the interests of both parties to a contract.

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Aditya Parolia is one of the leading counsels in India for Corporate, Commercial, Real Estate and Consumer disputes. He has been instrumental in many land mark judgments passed under Insolvency & Bankruptcy Code and Consumer Protection Act. Aditya is a Partner at PSP Legal, Advocates & Solicitors, a law firm known for its diverse practice areas and revolutionary approach to tackle with the issues. Aditya is Master of Laws in Commercial and Financial Services Law from National University of Singapore (NUS). His academic qualifications also include Post-Graduation Diplomas in International Laws from institutes like Indian Society of International Law and special courses from international academies like Hague Academy of International Law. He is a member of bar associations like YIAG, YICCA, DHCBA and SCBA. Aditya has served on the panel of various government organizations including Union of India, NBCC, Delhi Development Authority, BSNL, and many other PSUs.

Aditi Sinha is an Associate at PSP Legal, Advocates & Solicitors. Ms. Sinha graduated from GLC Mumbai 2018 & has been working extensively on corporate & commercial disputes.