Covid-19: Court Has No Role To Play In Private Contracts, Says Delhi High Court
Government circulars under the Disaster Management Act cannot intervene in private contractual commercial matters, the Delhi High Court has said. It's beyond the jurisdiction of a writ court to direct compliance of circulars which seek to regulate private contracts, it held.
The ruling came in a batch of petitions, filed by exporters-importers, seeking exemption of certain penal charges in the wake of business disruption caused by Covid-19.
Ameliorative measures, under the Disaster Management Act, cannot serve the interests of one class of persons who are affected by the disaster, at the expense of the other, the court said.
The Painful Penalty
The matter revolved around the penal charges levied by Inland Container Depots and Container Freight Stations. ICDs and CFSs are agencies which facilitate storage of imported goods, prior to them being released by the customs.
This storage is permitted without any fee for stipulated number of days. Beyond such “free days”, they suffer penal charges, as per the contract between the agency and the importer.
Similar to these are charges levied by shipping lines. Ordinarily, after containers are unloaded from the vessel in which they arrive, the containers are required to be returned to the shipping lines within a contractually stipulated number of free days. Post which, they suffer contractually agreed detention charges.
The petitioners sought exemption from paying these penal charges during the entire period of lockdown enforced by the government due to the Covid-19 pandemic. They cited inability to move or transport their export/import goods as grounds for relief.
In their support, the petitioners relied on various circulars, office memorandums, guidelines and advisories issued by the Ministry of Shipping, Directorate General of Shipping and Central Board of Indirect Taxes and Customs granting relief on penal charges.
For instance, an April 21 circular by the shipping ministry to all major ports read -
“Ports shall ensure that no penal charges, demurrages, detention charges, dwell time charges, anchoring charges, penal berth hire charges, performance related penalties etc. are levied on any port user for any delay in berthing, loading/unloading operations or evacuation/arrival of cargo during the lockdown period plus 30 days recovery period.” – Ministry of Shipping
Authorities Can't Interfere With Penalty Charges, High Court Says
The high court pointed to the provisions of Customs Act, Merchant Shipping Act and Major Ports Act to conclude that none of the legislations grant any power to any authority to regulate, interfere or interdict the collection of charges by ICDs, CFSs or shipping lines, against storage of goods or failure to return the goods within the free period or beyond.
The circulars could not have been validly issued under any of these legislations, the court said. It dismissed the argument that the directions were in the nature of ameliorative measures for the disruptions caused due to pandemic, and therefore permissible under the Disaster Management Act.
The high court relied on the Supreme Court's decision on the issue of school fees to reject this argument.
There is... not even a tittle of indication that in the name of mitigating measures, the disaster management plan may comprehend the issue of direction in respect of economic aspects of legitimate subsisting contracts or transactions between two private individuals with which the state has no direct causal relationship...Delhi High Court
The court also observed that allowing for any waiver in penal charges would result in huge expenses, substantially affecting the cash flow of ICDs, CFSs or shipping lines.