The Ministry of Finance has issued an Office Memorandum dated May 13, 2020 in relation to Force Majeure Clause.
As per the OM, in view of restrictions placed on the movement of goods, services and manpower on account of the lockdown, situation prevailing overseas and in the country in terms of the guidelines issued by the MHA under the OM Act 2005 and the respective State and UT Governments, it is not possible for the parties to the contract to fulfil contractual obligations.
OM refers to ‘Manual for Procurement of Goods 2017’, ‘Manual for Procurement of Works 2019’ and ‘Manual for Procurement of Consultancy and other Services 2017’ issued by the Department of Expenditure. These Manuals recognize extraordinary events or circumstances beyond human control leading to delays in or non-fulfilment of contractual obligations as force majeure events allowing invocation of FMC after following due procedure.
The OM draws attention to Public-private Partnership (PPP) concession contracts, saying that a period of the contract may have become un-remunerative and therefore, after fulfilling due procedure and wherever applicable, parties to the contract may invoke FMC for all construction/works contracts, goods and services contracts and PPP contracts with Government Agencies. Wherever, FMC is invoked the date for completion of contractual obligations which had to be completed on or after February 20, 2020 shall stand extended for a period not less than 3 months and not more than 6 months without imposition of any cost or penalty on the contractor/concessionaire.
The concession period in PPP contracts ending on or after February 20, 2020 shall be extended by not less than 3 and not more than 6 months. The period of extension will be decided based on the specific circumstances of the case and the period for which performance was affected by the force majeure events.
Further it is clarified that invocation of FMC would be held valid only in a situation where the parties to the contract were not in default of the contractual obligations as on February 19, 2020. It is further clarified that invocation of FMC will not absolve all non-performances of a party to the contract, but only in respect of such non-performance as is attributable to a lockdown situation or restrictions imposed under any Act or executive order of the Government/s on account of COVID-19 global pandemic.