On April 20, 2020, the Delhi High Court, passed an order in the matter of Halliburton Offshore Services Inc. (“Petitioner”) vs. Vedanta Limited and Anr. (“Respondent”).

 Facts of the case: 

Consequent to the floating of an international tender, by the Respondent, for development of three blocks (Mangala, Bhagyam and Aishwarya, together denoted by the acronym "MBA"), and the acceptance of the offer of the Petitioner, a contract dated April 25, 2018 (“Contract”) was executed between the Petitioner and the Respondent for integrated development of the MBA “(Project”). In terms of the Contract, the Petitioner furnished to the Respondent various bank guarantees for performance and liquidated damages and advance bank guarantees, of which, the present petition concerns eight bank guarantees (collectively “Bank Guarantees”). Owing to a complete lockdown, on industrial activities as well as on movement of persons in the country, including, specifically, in the state of Rajasthan due to the n-COVID-2019 pandemic, the Petitioner was unavoidably handicapped in performing the Contract. The Petitioner had addressed communications, dated March 18, 2020 and March 25, 2020, to the Respondent invoking the ‘force majeure’ clause in the Contract for seeking the benefit thereof. The Petitioner informed the Respondent that it intended to initiate arbitration proceedings under the arbitration agreement under the Contract. However, the Petitioner, being of the opinion  that the Respondent might terminate the Contract and proceed to invoke and encash the bank guarantees provided by the Petitioner, resulting in irreparable prejudice to it, filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 with the Delhi High Court.

The Delhi High Court held that: 

1. The countrywide lockdown, which came into place on March 24, 2020 was prima-facie in the nature of ‘force majeure’. Such a lockdown is unprecedented and was incapable of having been predicted either by the Respondent or by the Petitioner.
2. In view of the submission of the Petitioner that it was actually working on the Project till the imposition of lockdown on March 22, 2020, or at least shortly prior thereto, and in view of the sudden and emergent imposition of lockdown, the interests of justice would justify an ad- interim injunction, restraining the Respondent from invocation or encashment of the Bank Guarantees, till the expiry of exactly one week from May 3, 2020, till which date the lockdown stands presently extended.
3. As to whether this interim injunction merits continuance, thereafter, or not, would be examined on the next date of hearing, consequent to pleadings being completed and all requisite material, including all relevant Governmental instructions, being placed on record. The injunction presently being granted is purely ad-interim in nature, and is being granted only in view of the completely unpredictable nature of the lockdown, and its sudden imposition on March 22, 2020, of which the Petitioner could not legitimately be treated as having been aware in advance.

The Government itself has, after imposition of the lockdown, being issuing instructions, from time to time, seeking to mitigate the rigours and difficulties that have resulted, unavoidably, as a result of the imposition of the lockdown. Therefore, there is no reason for the Petitioner ought not to receive limited protection till the next date of hearing, subject to orders which may be passed in these proceedings thereafter.

This update has been contributed by Pratish Panjabi (Partner) and Harshita Jagwani (Associate).