Mumbai High Court has dismissed a plea for urgent relief filed by Indian steel importers, who invoked the force majeure clause and sought the court’s direction to prevent the bank from encashing the Letter of Credit (LoC) given by Korean exporters. The case will be heard as per regular schedule.
Steel importers had evoked the force majeure clause citing the COVID-19 lockdown in India. They sought court’s direction to restrain the exporters’ bank from encashing the LoC which was issued as a guarantee in case the purchasers (importers) refused to make payment for the goods exported. These importers stated that due to the lockdown declared by the government the contracts entered with their Korean counterparts was unenforceable.
The court observed that the export shipment was dispatched from Korea to Mumbai on cfr terms and the Korean suppliers had complied with their obligations stated in the contracts as the good had already been shipped. Exporters cannot be held responsible for the importers inability to receive the shipment and suffer damages. The court said that LoC are independent transaction with the bank and a dispute between the importer and exporter is not the bank’s concern.
Noting that steel is an essential service in India and its movement is not restricted due to the lockdown, the court said the importers cannot invoke the force majeure to retract from their contractual obligation of making payments for the shipment.