To prevent the spread of the Covid-19 pandemic, the Government of India, vide its order dated March 24, 2020, under Section 10(2)(l) of the Disaster Management Act, 2005, ordered a lockdown of the entire country except the essential services for a period of 21 days effective from March 25, 2020 which has now been extended to May 17, 2020 following two extensions.
The GOI has also issued guidelines in furtherance to its order dated 24.03.2020 to contain the spread of Covid-19. Further, any violation of these guidelines would attract action under Section 51 to 60 of the Disaster Management Act, 2005 and Section 188 of the IPC.
This Covid-19 pandemic is a force majeure event and in contracts where there is no clause of force majeure event, Section 56 of the Indian Contract Act, 1872, can be triggered to claim the impossibility of performance. However, the question is whether this lockdown order due to Covid-19 can amount to Change in Law? As for the EPC agreements with NHAI, the answer is Yes! and the same is discussed below.
Definition of Change in Law: Change in law has been defined under an EPC Agreement as follows:
"Change in Law" means the occurrence of any of the following after the base date:the enactment of any new Indian law;the repeal, modification or reenactment of any existing Indian law;the commencement of any Indian law which has not entered into effect until the base date;
a change in the interpretation or application of any Indian law by a judgement of a court of record which has become final, conclusive and binding, as compared to such interpretation or application by a court of record prior to the base date.What is law? As per Article 1.2.1(b) of the Indian Law, it shall include the laws, acts, ordinances, rules, regulations, bye laws or notifications which have the force of law in the territory of India and as from time to time may be amended, modified, supplemented, extended or re- enacted. The relevant part of Article 1.2.1(b) is reproduced hereunder:
1.2 Interpretation
1.2.1 In this Agreement, unless the context otherwise requires
(b) references to laws of India or Indian law or regulation having the force of law shall include the laws, acts, ordinances, rules, regulations, bye laws or notifications which have the force of law in the territory of India and as from time to time may be amended, modified, supplemented, extended or re- enacted.
Is an order or guideline a law? As per the definition of Change in Law read with Article 1.2.1(b) of the EPC Agreement, Change in Law would mean change in any law, act, ordinance, rule, regulation, bye law or notification which have the force of law. As per the principle of "ejusdem generis" an order or guideline under a statute and having the force of law can also be read as a change of law.
The above preposition is also supported by the judgment of hon'ble Supreme Court of India in the case of Energy Watchdog and Ors. Vs. CERC & Ors., MANU/SC/0408/2017 wherein the hon'ble court in para 53, held a statutory document issued under an Act and having the force of law to be covered under the expression Change in Law and the consequential benefits of change in law can be claimed thereupon.
view of the above, the order, dated March 24, 2020, by the Government of India under Section 10(2)(l) of the Disaster Management Act, 2005 and the guidelines in furtherance to this order to contain the spread of Covid-19 would amount of Change in Law as the same would fall under "enactment of any new Indian law" under the EPC Agreement and thus, entitling the contractors of its consequential benefits.
Originally published on April 2020
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