On 17 April 2020, Ministry of New & Renewable Energy, Government of India (MNRE) issued an office memorandum (Memorandum II) requiring all renewable energy implementing agencies to treat lockdown due to COVID-19 as ‘force majeure’.
The COVID-19 pandemic has forced governments to take exceptional measures such as implementing mandatory lockdowns and restricting travel. This unprecedented situation is raising significant tax issues, especially where there are cross-border elements in the equation. Individuals have been forced to stay for long in a country where they do not ordinarily reside, thereby triggering residency rules in that country. Many cross-border workers are unable to physically perform their duties in their country of employment and may have to stay at home and telework.
To curb the outbreak of COVID-19 in India, the Government of India had imposed a lockdown on 24 March 2020 for a period of 21 days till 14 April 2020. The said lockdown has now been further extended till 3 May 2020 by the Prime Minister and the Ministry of Home Affairs (MHA). They released an order dated 14 April 2020, inter alia, formalising the extension and stating that the MHA guidelines issued previously on 24 March 2020 along with subsequent amendments will continue to remain in force till 3 May 2020.
As the situation in view of COVID-19 is evolving, the Government of India has been announcing quite a few relaxations with respect to various income tax related provisions and compliances. In furtherance to the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (please see our ERGO dated 03 April 2020), some of the key relief measures provided for income taxes include:
A single bench of the Bombay High Court has refused ad-interim reliefs to the Petitioners who were seeking to restrain the Respondent bank from negotiating / encashing the letters of credit, on the ground that the contracts with the Respondent seller were terminated as unenforceable on account of frustration, impossibility and impracticability caused due to the coronavirus disease (COVID-19) and the government lockdown.
The onset of Covid-19 has set in motion a series of events which is bound to test India’s debtor-creditor relationship. Over the years, Indian courts have upheld the bargain struck by debtors and creditors and not allowed excusal of performance on grounds of force majeure or frustration. India’s new bankruptcy code (the “IBC”) played a critical role in re-balancing terms in favour of creditors.
On 7 April 2020 Singapore passed the COVID-19 (Temporary Measures) Act, 2020 (Act) to provide temporary relief to parties who are unable to perform their contractual obligations due to the COVID-19 pandemic (COVID-19), amongst other measures. It must be noted that the provisions of the Act relating to temporary relief for inability to perform contractual obligations will come into effect from the date that the Minister of Law, Singapore, appoints by notification in their Gazette.
The COVID-19 pandemic has disrupted the justice delivery system like never before. The compulsions associated with ‘social distancing’ coupled with lockdown directives have led courts and tribunals to shut their premises to the public. At the same time, recognizing that a complete shut-down of the justice-delivery system is undesirable, judicial administrators have turned to technology to meet the challenges posed by the pandemic. Various judicial and quasi-judicial bodies, led by the Supreme Court, have been conducting hearings online.
As India enters the last week of the 21-day nation-wide lockdown, there is still uncertainty of what lies ahead. It is possible that the lockdown may only be gradually eased.
The current Covid-19 pandemic and the imposition of various social distancing and other restrictions in India and elsewhere in the world is likely to cause significant disruption to supply chains and potentially make the performance of contracts challenging. In this note, we outline the position under Indian law with regard to whether performance of obligations can be excused on the grounds of frustration through “force majeure” and “material adverse change” (“MAC”) clauses.
