COVID-19 is undoubtedly an unprecedented socio-economic crisis which have affected the society, political structure, economy and have questioned the health infrastructure to a large extent. Dealing with the situation, Ministry of Law, Singapore passed the COVID-19 (Temporary Measures) Act 2020 (hereinafter mentioned as ‘the Singapore act’) which seeks to offer temporary relief to businesses and individuals who are unable to perform their contractual obligations due on or after 1 February 2020 for contracts that were entered into before 25 March 2020.
“You’re looking at economic devastation. Businesses destroyed, people’s lives ruined, and in such a situation, you don’t talk contract. You talk equity, you talk justice, you talk about what is the right thing to do.” – Minister for Law K Shanmugam, Singapore.
The key objective of the Singapore act is only to defer the enforcement of the contractual
obligations for a period of time (for an initial period of six months) and does not in anyway relieve the party from underlying contractual obligation which he is entrusted with. It seeks to provide temporary cash-flow relief for those businesses and individuals, who may otherwise have to pay damages or risk having their deposits or assets forfeited. How this right to suspend the contractual obligation be enforced? is an interesting co-related approach of negotiation and the the judicial control mechanism. The rules therein recommend that the both parties shall first understand each other position, discuss the same, try to reach a compromise with an effective negotiation which parties can do, as a result creating a win-win situation for themselves, unlike in India where negotiating on terms and conditions of the contractual obligation is ruled by will of the parties involved and failure to do so leave them with the remedies agreed by the parties like resort to a
Dispute Resolution clause. The ‘Notification for Relief’ has been mandated by the Singapore act which shall be served by a party seeking relief to the other party or parties to the contract, which seems fairly similar to the equity rule of Indian jurisprudence of serving notice to the other party with an intent to invoke a right to seek remedy against the party at fault/ with breach.
When a party to a contract serves a notification for relief on the other party, the following actions will be prohibited:
(a) Starting or continuing court proceedings or insolvency proceedings.
(b) Enforcing collateral over immovable property (e.g. commercial premises).
(c) Enforcing collateral over plant or machinery that is used for business (e.g. delivery vehicle).
(d) Terminating leases for commercial or industrial property or licence of non-residential premises.
If any court proceedings have already started, they will be stayed or suspended.
Additional relief applies for the certain contracts:
1. Construction and supply contracts
– Contractors will not be liable for breach of contract or liquidated damages.
– Calling on a performance bond will not be allowed.
2. Secured loan agreements to SMEs
– Your creditor cannot enforce the security (i.e. over commercial or industrial property, plant or machinery used for business) located in Singapore
– Your creditor cannot start or continue court or insolvency proceedings against you
On the other hand, India has observed a very different approach while providing relief measure in the advent of COVID-19. Under the Disaster Management Act by a notification dated 24 March 2020, Ministry of Home Affairs, Government of India mandated a nationwide lockdown excluding essential services and now we have reached to the final leg of the lockdown phase 3.0, in order to address uncertainty, different ministries and departments proposed several relief measures.
• One such example is relief measures announced by the Ministry of New & Renewable Energy (MNRE) vide Notification No. 283/18/2020-Grid Solar Power Division, which has directed all renewable energy implementing agencies of the Ministry itself to treat delay on account of disruption of the supply chains due to spread of coronavirus as ‘Force Majeure’ thereby granting suitable extension of time for projects.
• The another example can be the order of the Honourable Supreme Court passed on 6th May, 2020 in In re: Cognizance for Extension of Limitation, Sun Moto Writ (Civil) No. 3/2020, wherein “……taking into consideration the effect of the Corona Virus (COVID-19) and resultant difficulties being faced by the lawyers and litigants and with a view to obviate such difficulties, all periods of limitation prescribed under the Arbitration and Conciliation Act, 1996 and under section 138 of the Negotiable Instruments Act, 1881 shall be extended with effect from 15.03.2020 till further orders to be passed by this court”.
A Brief Comparative Study: The relief measures notified by the MNRE amounts to a unilateral amendment of the contract approach where the one party is an agency under the Government ministry and is detrimental to the rights of the other party, making a decision by a person in its own case without serving a notice or an opportunity to be heard to the counter party, which can be identified as a debatable position. The Singapore law achieves the objective by way of a law and by having a system of independent assessors who will examine cases of dispute.
In the latter example, the relief measures has been granted to the cases which are already going through the adjudication process. The interim relief measures by the Indian Government have failed to provide a remedial structure to the contracting parties where both are private agencies and have faced business hardship. Citing an example, the frustration of lease deeds in the advent of the pandemic is completely dependent on the force majeure clause in the lease deed and in the case of absence of such clause or subsequent to the failure of negotiation, the parties are only left with a remedy to approach the court of law seeking the direction, whether the prevalent situation can be termed as ‘irresistible force’ thereby relieving the party from their contractual obligations. (The
detailed observations can be accessed here). This implies that the affected party will have to approach the court praying that its performance is really and materially impacted by COVID-19 and does not amount to a breach. On the other hand, with respect to Commercial & Industrial Property leases under the Singapore Act, where tenant is unable to pay rental then in such cases landlord cannot terminate the lease or evict an tenant and simultaneously, rental payment is suspended for upto 6 months.
Conclusion:
With the enactment of a uniform act, Singapore law has created viable remedial measures in favour of the affected party thereby preventing counter party from taking adverse steps once he has been served with a notice for relief. In case if counterparts disputes the application of the law to the affected party’s favour, then an assessor, duly appointed under the provisions of the act will determine whether such inability of performance was due to COVID-19 events or not? Only when the assessor determines that the interim relief under the Singapore Act is not attracted, the right to approach the court is invoked. While in India, in absence of a uniform law, the courts will be called upon to adjudicate the issues of breach of contract and whether non performance of the breaching party can be identified as a defence in light of COVID-19 related events, which has necessarily multiplied the cases of litigation thereby creating a tiresome situation for the judiciary past the lockdown period.
References:
1. COVID-19 (Temporary Measures) Act, 2020
2. Rategain Travel Technologies vs Ujjwal Suri, O.M.P (MISC) 14/2020, in the High Court of
Delhi
3. Column published by Bar and Bench available at https://www.barandbench.com/columns/singapore-covid-19-temporary-measures-act-2020-and-whether-india-can-benefit-by-followingthe-singapore-model
