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Force Majeure: Evolution of Jurisprudence in India Post COVID-19

The extraordinary outbreak of the Covid19 pandemic has had staggering effects on the economy, health and commerce of about 110 nations across the globe. Even after almost a year, the situation is far from normal. In addition to the massive pressure on the health and medical segments, several other unprecedented factors played crucial part in the whole system, economy, commerce, or business. Given the present situation of disruption of supply chaindisruption of assured manpower, uncertainty of future planning, inadequacy of security as well as the forced restraints in free commercial activities, numerous commercial contracts have either been interrupted, delayed or cancelled. The present situation has thrown light on several important questions with respect to the jurisprudence of the force majeure clause in various commercial contracts or frustration of contracts 

 

Force Majeure Typically in Law

 

The term force majeure which seems to have been borrowed from the Code Napoleon had received interpretation in several decisions of the English Courts in earlier years. In Matsoukis v. Priestman and Co.[i] . Justice Bailhache opined that force majeure would include strikes and break-down of machinery but not bad weather, or football matches, or a funeral. In Lebeeaupin v. Crispin[ii] Justice McCardie had observed: “A force majeure clause should be construed in each case with a close attention to the words which precede or follow it, and with due regard to the nature and general terms of the contract. The effect of the clause may vary with each instrument.”

In the Indian context, the Supreme Court has considered, interpreted and decided the events of force majeure in various judicial precedents, inter-alia from Satyabrata Ghosh vs Mugneeram Bangur[iii] to Energy watchdog vs CERC[iv] The Court has maintained a strict yet flexible approach towards the concept of force majeure and frustration of contracts. In the case of Alopi Prashad and Sons vs. UOI[v] the Supreme court had observed that commercial hardship shall not be a just and reasonable ground to support frustration of contract and excuse performance.

As we find in the commercial world, contracting parties have generally been incorporating the force majeure clause in their contracts since ages, to absolve themselves of any liability arising out of events beyond their reasonable control. However, in this discussion we would focus the force majeure arising out of Covid-19 pandemic.

 

COVID 19 and Application of Force Majeure

 

There was a difference of opinions and questions were raised over the fact that some contracts though having a force majeure clause, do not stress on the word ‘pandemic’, ‘epidemic’, ‘disease’ etc. , while majority of the contracting parties rely on the general phrase ‘any other unforeseeable event, not under the control of either of the parties.’

 
Executive Interpretation:
 

Alike the private sector, the Government contracts and the Public Sector transactions also started suffering on account of the pandemic and declaration of lockdown throughout the country. To address the situation fairly, the Ministry of Home Affairs came out with Notification No. F. 18/4/2020 PPD dated 19-02-2020 with respect to Manual for Procurement of Goods, 2017 declaring that the interruptions in supply chain due to Covid 19 from China or any other country shall be covered under the ambit of force majeure, and that force majeure shall be invoked whenever considered appropriate following the due process of law.

While the power of the Ministry to bring certain events within the ambit of force majeure under clause 9.7.7 of the Manual for Procurement of Goods, 2017 by a simple notification, may be a different issue, but as it appears, by this notification the Corona Pandemic was brought within the meaning of force majeure as defined in the Manual for Procurement of Goods, 2017 and tacitly, this event certainly becomes applicable in respect of all government and/or public sector contracts irrespective of application of the Manual for Procurement of Goods, 2017.  It may be noted that this Memorandum of 19th February 2020 was issued prior to Covid-19 affecting operations in India, recognizing the difficulty faced by the contracting parties regarding import of materials from other countries which were impacted by the pandemic.

Similarly, on account of various representations and submissions made by various Renewable Energy (RE) Developers and RE Associations, and considering the prevailing situation, the Ministry of New and Renewable Energy vide Office Memorandum No. 283/18/2020-GRID SOLAR dated March 20, 2020 declared Covid-19 as a force majeure event. The Ministry vide the said order granted time extensions in scheduled commissioning date of RE projects, in light of disruption of supply chain due to the pandemic.

The Ministry of Roads Transport and Highways also in its Circular dated 18.05.2020 inter-alia classified the pandemic as a force majeure event. In addition, the Ministry of Home Affairs by its Order no. 40-3/2020(D) dated 24 March 2020 expressed that the country was threatened with the spread of Covid 19 virus and therefore has considered to take effective measures to prevent its spread across the country and therefore in exercise of powers under section 10(2)(I) of the Disasters Management Act 2005 issued various guidelines for immediate implementation. Subsequently, by Office Memorandum dated 13 May 2020 the Ministry of Finance, Department of Expenditure referred to its earlier memorandum dated 19 February 2020 and also referred to the Manual of Procurement and recognized inter-alia that in view of the prevailing restrictions, it may not be possible for the parties to the contract to fulfill contractual obligations. Therefore, after fulfilling due procedure and wherever applicable, parties to the contract could invoke force majeure clause for all construction / works contracts, goods and services contracts, and PPP contracts with Government Agencies up to a certain period and subject to certain conditions. Therefore, officially the Government of India recognized Covid-19 Pandemic as an event of force majeure applicable in relation to contracts with Government Agencies, in effect resulting inclusion of Public Sector Undertakings also.

While the specific acceptance of force majeure in relation to Government sector contracts may not have any binding effect on the contracts outside the scope of the explicit instances or in relation to purely private contracts between two private parties, they probably offered an explanatory value to bring Covid 19 and the forced restraints imposed on account of lockdowns, within the ambit of force majeure.  

 
Judicial Interpretation:
 

In the Indian judicial scenario the court would rely on the terms of force majeure clause in the contracts or on principles of frustration under section 56 of the Contract Act. This means, unless there is compelling evidence for non-performance of contract the courts do not favor parties resorting to frustration or termination of contract. On account of the enormous devastative effects the Pandemic created on the commercial and economic environment in the country, different Courts had to come forward and grant relief to different contracting parties who were severely affected by the Pandemic.

The Delhi High Court considered the matter in June 2020 in the case of MEP Infrastructure Developers Ltd vs. South Delhi Municipal Corporation and Ors[vi]. The court essentially relied on the Ministry of Roads Transport and Highways (MORTH) circular and observed that:

27(i) The respondent Corporation itself referred to Circular dated 19.02.2020 which notified that the COVID-19 pandemic was a force majeure occurrence. In effect, the force majeure clause under the agreement immediately becomes applicable and the notice for the same would not be necessary. That being the position, a strict timeline under the agreement would be put in abeyance as the ground realities had substantially altered and performance of the contract would not be feasible till restoration of the pre-force majeure conditions.” 

The court also expounded on the continuous nature of the force majeure event and held that the subsequent lockdown relaxations given by the central government and the state government shall not amount to abatement of the force majeure event, at least in respect to major contracts such as road construction projects. The court also identified the distinct effects of the lockdown, independent of the effects of the pandemic and its implications on various contracts which many be affected by the force majeure conditions.  

In the case of Standard Retail vs G.S Global Corp Pvt. Ltd[vii] steel importers had approached the Bombay High Court seeking restraint on encashment of letters of credit provided to Korean exporters in view of the COVID-19 pandemic and the lockdown declared by the Central/State Government citing that the contracts between the parties were unenforceable on account of frustration, impossibility, and impracticability. The Bombay High court by its order dated 8 April 2020 rejected the plea inter-alia on the grounds: 

  1. The Letters of Credit are an independent transaction with the Bank and the Bank is not concerned with underlying disputes between the buyers and the sellers.
  2. The Force Majeure clause in the present contracts is applicable only to one respondent and cannot come to the aid of the Petitioners.
  3. The contract terms are on Cost and Freight basis (CFR) and the respondent had complied with its obligations and performed its part of the contracts and the goods had already been shipped from South Korea. The fact that the Petitioners would not be able to perform its obligations so far as its own purchasers are concerned and/or it would suffer damages, is not a factor which can be considered and held against the Respondent.

The court also observed that:  

“The Notifications/Advisories relied upon by the respondent suggested that the distribution of steel has been declared as an essential service. There are no restrictions on its movement and all ports and port related activities including the movement of vehicles and manpower, operations of Container Freight Station and warehouses and offices of Custom Houses Agents have also been declared as essential services. The Notification of the Director General of Shipping, Mumbai, states that there would be no container detention charges on import and export shipments during the lockdown period.

In any event, the lockdown would be for a limited period and the lockdown cannot come to the rescue of the Petitioners so as to resile from its contractual obligations with the Respondent No. 1 of making payments”.

Therefore, even if the event is a force majeure, contracts may not be avoided if the event does not affect performance of the entire contract or affect every aspects of any contract. The event has to be specific to the failure.

In the Halliburton case[viii] , decided on May 29, 2020, the Delhi High court was of an unequivocal opinion that:

“62. The question as to whether COVID-19 would justify non-performance or breach of a contract has to be examined on the facts and circumstances of each case. Every breach or non-performance cannot be justified or excused merely on the invocation of COVID-19 as a Force Majeure condition. The Court would have to assess the conduct of the parties prior to the outbreak, the deadlines that were imposed in the contract, the steps that were to be taken, the various compliances that were required to be made and only then assess as to whether, genuinely, a party was prevented or is able to justify its non- performance due to the epidemic/pandemic”.

Further, while discussing the scope of the force majeure clause in contracts it was observed by the court that:

“Para 63. It is the settled position in law that a Force Majeure clause is to be interpreted narrowly and not broadly. Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations. As observed in Energy Watchdog it is not in the domain of Courts to absolve parties from performing their part of the contract. It is also not the duty of Courts to provide a shelter for justifying non- performance. There has to be a ‘real reason’ and a ‘real justification’ which the Court would consider in order to invoke a Force Majeure clause”.

The Madras High Court in the case of Tuticorin Stevedores’ Association vs The Government of India[ix], dated 14 September 2020, observed that the question as to whether on account of the pandemic outbreak of Covid-19, the parties can invoke the principle of force majeure need not detain us. The calamitous impact and disruption caused by Covid-19 on the economic front has been recognized by the Government itself.

In Confederation for Concessionaire Welfare & Ors. vs Airports Authority of India & Anr[x] the Hon’ble Delhi High Court observed on 17 February 2021 inter-alia that the court has perused the clauses relating to Force Majeure. There can be no doubt that the pandemic is a force majeure event. Since the Petitioners wish to terminate/exit from their respective agreements, while directing completion of pleadings and while the issues are under examination by this Court, there is a need to reduce the risk to both parties as simply postponing the exit by the Petitioners would also make it impossible for the AAI to re-allot the spaces to willing concessionaires and the outstanding against the Petitioners would continue to mount. Accordingly, as an interim measure the Hon’ble Court directed certain processes to be followed.

In another case of Ramanand vs. Dr. Girish Soni RC.[xi], an application came under consideration of the Delhi High Court which raised various issues relating to suspension of payment of rent by tenants owing to the COVID-19 lockdown crisis and the legal questions surrounding the same. By order dated 21-5-2020 the Delhi High court while determining whether lease agreements are covered under the ambit of section 32 and section 56 of the Act and even though it was held that suspension of rent on the grounds of force majeure is not permissible under the circumstances, the court allowed relaxation in the schedule of payment of the outstanding rent owing to the lockdown.

The Hon’ble Supreme Court in the case of Parvasi Legal Cell and Ors. Vs Union of India and Ors., observed that the pandemic was an ‘unusual’ situation, that had impacted the economy globally. This case revolved around the liability of the airlines to compensate passengers who faced cancellation of flights due to government-imposed lockdowns and restrictions on inter-state and international travels. The court relied on the office memorandum issued by the Ministry of Civil Aviation dated 16th April 2020 to dispose of the petition.

In the case of Transcon Iconia Pvt. Ltd v ICICI Bank[xii], the Bombay High Court while determining whether moratorium period would be excluded for NPA classification observed inter alia as under:

‘38… the period of the moratorium during which there is a lockdown will not be reckoned by ICICI Bank for the purposes of computation of the 90-day NPA declaration period. As currently advised, therefore, the period of 1st March 2020 until 31st May 2020 during which there is a lockdown will stand excluded from the 90-day NPA declaration computation until — and this is the condition — the lockdown is lifted’.

Yet, in another judgment passed in R. Narayan v. State of Tamil Nadu & Ors.[xiii] the Madras High Court directed the Municipal Corporation to waive the license fee for running a shop at a bus stand, and observed that:

“…this Court would be justified in treating the “lock down” as a force majeure event which will relieve the licensee from performing his obligation to the corresponding extent.” The Court also observed that … “The respondents (The Government of Tamil Nadu & Ors.) themselves have chosen to treat the lock down restrictions as a force majeure event. But they have relieved the licensees from the obligation to pay the fees only for two months. The reason for granting waiver for the months of April and May would equally hold good for the entire “total lockdown” period.”

Therefore, as it appears, most of the High Courts relied on the government orders that classified pandemic as force majeure, although the relief granted in each case has been subjected to restraint based on the accompanying facts and circumstances. The common observation however remained that the Covid-19 pandemic is a force majeure event.

 

Key Takeaways

 

Hence, it can be summarized that, commercial hardship shall not be a just and reasonable ground to support frustration of contract and excuse performance. The Courts have no general inclination to absolve a party from the performance of its part of the contract merely because its performance has become onerous on account of an unforeseen turn of events. Parties are at an obligation to complete their part of the contract against all odds, within a reasonable and practical limit. However, where the contract itself either impliedly or expressly contains a term according to which performance would stand discharged under certain circumstances, the dissolution of the contract would take place under the terms of the contract itself and such cases would be dealt with under Section 32 of the Act. If, however, frustration is to take place de hors the contract, it will be governed by Section 56.

The following preliminary conditions are emerging to be sine quo non to invoke covid-19 as a valid defense for non-performance:

  1. The contract is rendered impossible to perform: To establish pandemic as a force majeure occurrence de hors the contract the parties must demonstrate how the pandemic has disturbed the fundamental basis on which the obligations and agreements of the parties rested [Naihati Jute Mills Ltd. Vs Khayaliram Jagannath[xiv]]. This principle was also adequately elaborated upon by the Bombay High Court in Standard Retail vs G.S Global Corp Pvt. Ltd. A mere invocation of the force majeure clause in light of the pandemic does not absolve the parties from discharging their contractual obligations. A prima facie case has to be built justifying the reason for inability and seeking such an exemption.
  1. Prior conduct of the parties: While pleading the defense of force majeure, it is highly pertinent for the concerned party to ensure that, prior to the outbreak of the pandemic, the party was discharging its functions in a bona fide manner within the stipulated conditions of the contract. Additionally, as enumerated in the Halliburton case by the Delhi High Court, the concerned party should have demonstrated a bona fide attempt at undertaking all reasonable measures to execute its obligations in light of the situation and was genuinely prevented to act upon the same due to the collateral effects of the pandemic.
  1. Collection of documents capable of corroborating the claim of force majeure: It is crucial for the party invoking the force majeure clause to corroborate their claims with valid documents applicable to the specific instance, given the unusual and unprecedented situation. In the present scenario, these documents can include the abovementioned government circulars and guidelines, local medical reports, news reports, announcements etc. It needs to be kept in mind that generic documents howsoever crucial they may be, might not be enough in any specific case. While citing such documents, the affected party also has a duty to carry out a due diligence to ensure such exemptions and relaxations are strictly applicable to their case as observed in Standard Retail vs G.S Global Corp Pvt. Ltd.

 

No Straitjacket Formula                     

 

As can be summarized, different Courts in India have upheld the defense of frustration of contract and the defense of force majeure sparingly in every case. Even though the Covid 19 pandemic and its consequent lockdown can be generally covered under the ambit of force majeure, but there can’t be any straitjacket formula and its invocation strictly and solely shall depend upon the facts of each case, previous conduct of the parties and the prevailing circumstances in the specific scenario. If there are alternate modes of performing contractual obligations, the liable party shall not have the luxury to hide behind the comfort of doctrine of frustration or the doctrine of force majeure and absolve themselves of their duties. Accordingly, it would need a very careful examination of the whole situation before any ground is taken for avoidance of obligations under a concluded contract.

References:

[i] (1915) 1 K.B. 681

[ii] (1920) 2 K.B. 714

[iii] [1954 SCR 310]

[iv] [(2017)14 SCC 18].

[v] [1960 (2) SCR 793]

[vi] W.P.(C) 2241/2020

[vii] Commercial Arbitration Petition (l) no. 404 of 2020

[viii] Halliburton Offshore Services Inc. v. Vedanta Ltd. O.M.P (I) (COMM.) No. 88/2020 & I.As. 3696-3697/2020

[ix] WP(MD)No.6818 of 2020 and WMP(MD)No.6217 of 2020

[x] W.P.(C) 2204/2021 & CM APPL.6421-22/202

[xi] REV447/2017

[xii] 2020 SCC OnLine Bom 626

[xiii] Case No.19596 of 2020 and W.M.P.(MD)Nos.16318 & 16320 of 2020

[xiv] AIR 1968 SC 552

Image Credits: Photo by Medienstürmer on Unsplash

The Courts have no general inclination to absolve a party from the performance of its part of the contract merely because its performance has become onerous on account of an unforeseen turn of events. Parties are at an obligation to complete their part of the contract against all odds, within a reasonable and practical limit.

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Land Acquisition in India – A Tough Balancing Act

Sovereigns across the globe have relied upon the doctrine of eminent domain to acquire land for public use. Consent of those who own the land takes a backseat when the greater good is at stake. Guided by this utilitarian principle and to usher a sense of equality among the economically weaker citizens of this nation, ‘right to property’ was removed as a fundamental right through the 44th amendment. However, democracy demands people-pleasing and power mongers have to give in once in a while for a euphoric sense of justice to prevail. Consequently, the doctrine of eminent domain was balanced through the introduction of the Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlements Act, 2013 (RFCTLARR Act). The act empowered central and state governments to acquire lands for the development of public good with ‘consent’.

However, acquisition of land comes under Schedule VII i.e. the concurrent list which means both state and central governments can devise laws under it. This provided scope for abuse by states which enacted similar laws on land acquisition suiting their specific requirements. While doing this, the states remained undeterred by ‘Article 21’ that ensures the right to personal liberty and dignity, thus clearly defying the ‘basic structure’ of the constitution. Further, land acquisition under the said state laws was in blatant violation of the requirement that central laws enacted on subjects under the concurrent list must take precedence over the state laws. Federalism in this regard didn’t favour the distressed population. This misuse of power has caused negative externalities to the marginalized populations and the role of the capitalist class and private players in connection to the political establishment has been visible. This paper seeks to examine the impact of the state legislation which has resulted in exploitative conditions and varying judgments by high courts across the country.

The 2013 Act and 2014 Amendment Ordinance

The reasons for the introduction of the RFCTLARR Act in 2013 included lack of standing for the people displaced, lack of participation in the acquisition decision, inadequate compensation, insufficient coverage of families affected by the acquisition, procedural delays, and inequities as well as non-use of the land acquired. To some extent, the new law acted as a huge relief for marginalized landowners but it did not go down well with the state governments or industry participants who started protesting against the cumbersome process and the acquisition cost that, according to them, would hinder developmental activities.

To plug the vehement protests, an ordinance was promulgated that substantially altered the provisions of the RFCTLARR Act by exempting five categories of projects from the consent and social impact assessment provisions i.e. defense, rural infrastructure, affordable housing, industrial corridors, and infrastructure projects including Public-Private Partnership (PPP).[i] However, the ordinance lapsed after a few re-promulgation and law to replace the ordinance has not and most likely would not see the light of the day due to the sensitive nature of the subject and intense contestations by the stakeholders. A Joint Parliamentary Committee (JPC) is now shouldering the responsibility of bringing about the amendments.

Dilution of Key Provisions by States

In the meanwhile, several states have already brought about changes through Rules under Section 109 of the Act or have enacted their own state-level land acquisition legislations. At least six state governments have enacted their own land acquisition laws by seeking Presidential consent using Article 254 (2) of the constitution. These new state laws directly adopt the amendments proposed by the 2014 land ordinance and exclude acquisitions for certain purposes from the purview of the central law. State-level rules are diluting the applicability of progressive clauses like prior consent, public hearings, or Social Impact Assessment (SIA).

In Jharkhand, the state rules reduce the quorum of the gram sabha consent to one-third from half as required in the central rule. In Odisha and Jharkhand, unused acquired lands are repatriated into land banks rather than returning it to the original owners as required by the central law. The Tamil Nadu law allows unused land to be taken for any other purpose, provided the District Collector certifies the same. State Rules are reducing the amount of compensation to be paid against acquisitions. In states like Haryana, Chhattisgarh, and Tripura the multiplying factor for rural land is fixed at 1.00 as against 2.00 as specified in the central law.[ii]

Judicial Developments

While the states have been busy bypassing the law, courts have had to deal with a bombardment of litigation requiring interpretation of key provisions of the RFCTLARR Act as well as determining the constitutional validity of the state enactments. Key pronouncements have been made with regards to Section 24(2) of the RFCTLARR Act which states that after initiating land acquisition for a project under the 1894 law if the physical possession has not been taken by the developer or the compensation not paid to the landowners for more than five years, the acquisition process would lapse. In such cases, the government would have to initiate fresh acquisition under the Act.

A three-judge bench of the apex court had held in Pune Municipal Corporation v Harakchand Misirimal Solanki that mere deposit of compensation in government treasury cannot be regarded as a payment made to the landowner and acquisition proceedings under the 1894 Act will lapse in such cases. The decision was overruled by another three-judge bench in Indore Development Authority vs Shailendra holding that deposit of the award in treasury should be regarded as payment to the landowner who is refusing to accept compensation. Following the contradictory stand, a bench has been constituted by the CJI to end the controversy and all compensation matters in land acquisition cases pending in high courts have stayed till the issue is settled.

In another stark turn of events, the Madras High Court declared as “illegal” the amendment made by the Tamil Nadu government to the Centre’s Land Acquisition Act, exempting three state legislations from its purview. The court said, “In order to revive these acts, the State must re-enact these statutes, in accordance with Article 254(2) of the Constitution of India and obtain the assent of the President. Merely, by inserting Section 105-A and the 5th Schedule, in the new Act, these impugned enactments do not get revived. Since this had admittedly not been done, the Acts remain repugnant, and Article 254(1) renders them inoperative.”

Alternative to Acquisition

As far as the issue of developmental activities being hindered because of difficulty in land acquisition is concerned, the centre should look at encouraging land leasing and land pooling as is already being practiced in Haryana and UP. In such arrangements, the landowner lends the land to the government for a steadily increasing rent, or through an annuity-based system or through land development by a government agency, it said. Under pooling, the group of landowners gives their land to a government agency for developing the land with infrastructure and amenities and later they get a part of it back in return.

Achieving a balance

While RFCTLARR has completed six years, it has brought in radical awareness among the advocates of fair acquisition. This has led to increasing land litigations and a gradual rise in the intervention by courts. The progress of RFCTLARR is instrumental in shaping economic revival considering India’s fluctuating growth rates in recent years. There are more than 13,000 cases of land acquisition pending in courts. This raises concerns about the efficacy of the Act and the recent amendments. A conducive relation between fair compensation and economic development is essential in achieving a balance to boost not only economic growth but to aid the overall development of the nation.

References: 

[i] Section 10A of the LARR Ordinance, 2014

[ii] https://cprindia.org/sites/default/files/working_papers/MAPPING%20DILUTIONS%20-%20Exec%20Summary.pdf

 

Image Credits: Nandhu Kumar on Unsplash

While RFCTLARR has completed six years, it has brought in radical awareness among the advocates of fair acquisition. This has led to increasing land litigations and a gradual rise in the intervention by courts. The progress of RFCTLARR is instrumental in shaping economic revival considering India’s fluctuating growth rates in recent years. There are more than 13,000 cases of land acquisition pending in courts. This raises concerns about the efficacy of the Act and the recent amendments.

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Housing Apartheid In Urban Areas: A Constitutional Challenge

“Excellent brand new 2bhk fully furnished flat, cross ventilation, natural light, cosmopolitan society, no Muslims; with car-parking, on immediate sale, 5th floor. If interested, pls call___” read the controversial 99acres.com advertisement for a flat in Dadar (East), Mumbai.[1] This generated a furore and resulted in the removal of the advertisement from the website and a statement from them claiming that they were opposed to any kind of discriminatory practice.[2]

 

 

Jayanagar is one of the largest residential areas in Bangalore. The population is mostly dominated by upper-class Hindus and is extremely notorious in its treatment towards Muslims and sometimes to Christians too, with respect to letting outhouses.[3] They mask their prejudice mostly in the garb of not letting houses out to non-vegetarians (which is problematic on its own). The tolerance level is higher for Hindu non-vegetarians (preferably non-SC/ST), then Christians, then SC/STs and then Muslims.

These incidents and many more in addition to them provide a propitious opportunity to discuss housing apartheid, which is not peculiar to a particular area or city. The examples stated above display instances of housing apartheid in most cosmopolitan cities in the country. They illustrate discrimination and prejudice, either overtly or covertly, and, in my opinion, are in direct violation of Article 15 of the Constitution of India[4].

The concept of housing apartheid is elucidated herein by first discussing the infamous Supreme Court case, Zoroastrian Co-operative Housing Society Limited v. District Registrar Co-operative Societies (Urban),[5] which allowed for setting up of segregated housing societies, and then proceed to evaluate the constitutional provisions in the context of right to housing, for Muslims in particular, and finally query into the feasibility of regulating the private sphere in this context.

 

The case

 

In the Zoroastrian Co-operative Housing Society Limited case,[6] members of the Parsee community established a housing society and limited membership to the co-operation, through a bye-law, only to persons belonging to that community. The Respondent applied to the society, seeking permission to demolish the building and use the space for construction of a commercial building. Permission was not granted as the bye-laws of the society did not allow for the use of the property for commercial purposes. Subsequently, when he applied for permission to construct residential flats to be sold to Parsees, he was permitted to go ahead. When he entered into negotiations with a builders’ association for sale of property, he violated the restriction placed upon him with respect to not allowing membership of non-Parsees in the co-operative society. The matter reached the High Court of Gujarat when the society challenged such a violation. The High Court rejected the claim of the society and held that restricting membership would amount to a violation of the right to property and Article 300A. Subsequently, the society went on appeal to the Supreme Court of India, wherein the claim was upheld and the court held that the bye-law was not in contravention with Section 4 of the Gujarat Co-operative Societies Act which laid down that any bye-law which contravenes public policy would not be recognised. The court’s understanding of this provision was that public policy has to be located within the confines of the Act and not look for constitutional principles or provisions unless explicitly provided by the Act.  This judgement also held that a co-operative society does not come under the fold of a ‘state’ under Article 13 of the Constitution of India[7] and accordingly, a fundamental rights challenge cannot be held valid as they are attracted only when a state action contravenes these rights.

This is an extremely verticalist interpretation of the Constitution[8] and potentially bad in law. By taking this approach, the court has completely disregarded the obligation of non-state actors in not violating fundamental rights. For example, Article 17 of the Constitution[9] would be rendered a toothless provision if it is not enforceable against non-state actors. Another example that is closer to the topic in discussion is the case of Vishaka v. State of Rajasthan,[10] wherein, the Supreme Court issued guidelines and norms to be followed in order to prevent instances of sexual harassment against women at workplaces. Observance of these guidelines would not have been effective if state actors were the only bodies expected to do so. Horizontal application of fundamental rights, i.e., a rights challenge enforceable against both state and non-state actors, was etched out clearly in this case.

 

Right to housing

 

The Supreme Court has endorsed a segregationist view by allowing community based housing, despite religion being an explicitly mentioned ground for non-discrimination.[11] The Indian society has undergone the trauma of partition, and in this framework, it is important and would be a highly mature approach if consideration is given to what it means for a minority community to practice, profess and propagate their religion, without having the fear of being discriminated against, and the degree to which the right to dignity may enable an individual or a group of persons to enjoy the right to freedom of religion without the expectation and fear of either implicit or visible manifestations of hate and incitement to religious hatred.

The ease with which the Supreme Court allowed for such a discriminatory practice based on a specified ground to pass gives a huge leeway for other discriminatory practices based on non-specified grounds to be carried out, such as refusing housing on grounds such as HIV status, sexual orientation, disability, language etc.[12]

 

What can be done about it?

 

The Justice Sachar Committee Report (Report on Social, Economic and Educational Status of the Muslim Community of India), 2006 was submitted by the expert level group set by the Ministry of Minority Affairs.[13] It was recommended by this report that an Equal Opportunities Commission (EOC) be set up to keep a check on discrimination against minorities. The Madhava Menon Committee was set up in order to examine and analyse the structure and functioning of the EOC. This committee proposed the draft EOC Bill in 2008.[14] The Union Cabinet on 20 February 2014 gave its nod to the setting up of this Commission.[15]

While this Commission seeks to make a paradigm shift in the way equality is understood in the traditional sense, it is also onerous on the Commission to not exclude the housing sector from its immediate scope. Several critics have opined that such an Act would pervade into the private sphere of the landlord with respect to the choices that he/she would want to make about who to let out the house to. However, with the horizontal application of fundamental rights, such a problem would not arise as a violation of Article 15 would be enforceable against a private party too.

In arguendo, if such an application of fundamental rights were not allowed then, such a restriction on the choice of the landlord should be considered as a reasonable restriction as a direct co-relation can be made to increasing ghettoization of certain communities due to the practice of housing apartheid.[16]

 

Conclusion

 

The Zoroastrian Co-operative Housing Society Limited case narrowed down the scope of constitutional interpretation. However, with the coming of the EOC, the right to housing has to be construed as a constitutional guarantee and only when this is done can the principle of minority protection, which is one of the foremost responsibilities of the Constitution, be said to have been achieved to an extent.

 

References:

[1] Saurabh Gupta, Mumbai: No Muslims, said online ad for a flat, NDTV, 8 November 2013, available at: http://www.ndtv.com/article/cities/mumbai-no-muslims-said-online-ad-for-a-flat-443130 (Last visited on 18 March 2014).

[2] Mumbai property broker posts online ad, says no to Muslims, IBN Live, 7 November 2013, available at: http://ibnlive.in.com/news/mumbai-property-broker-posts-online-ad-says-no-to-muslims/432717-3-237.html (Last visited on 18 March 2014).

[3] Zainab Bawa, The Shame of a Name, Kafila, 20 March 2009, available at: http://kafila.org/2009/03/20/the-shame-of-a-name/ (Last visited on 18 March 2014).

[4] Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth

(1) The State shall not discriminate against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them

(2) No citizen shall, on grounds only of religion, race, caste, sex, place of birth or any of them, be subject to any disability, liability, restriction or condition with regard to

(a) access to shops, public restaurants, hotels and palaces of public entertainment; or

(b) the use of wells, tanks, bathing ghats, roads and places of public resort maintained wholly or partly out of State funds or dedicated to the use of the general public

(3) Nothing in this article shall prevent the State from making any special provision for women and children

(4) Nothing in this article or in clause ( 2 ) of Article 29 shall prevent the State from making any special provision for the advancement of any socially and educationally backward classes of citizens or for the Scheduled Castes and the Scheduled Tribes

[5] AIR 2005 SC 2306.

[6] Ibid.

[7] Laws inconsistent with or in derogation of the fundamental rights:

(1) All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency, be void

(2) The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void

(3) In this article, unless the context otherwise requires law includes any Ordinance, order, bye law, rule, regulation, notification, custom or usages having in the territory of India the force of law; laws in force includes laws passed or made by Legislature or other competent authority in the territory of India before the commencement of this Constitution and not previously repealed, notwithstanding that any such law or any part thereof may not be then in operation either at all or in particular areas

(4) Nothing in this article shall apply to any amendment of this Constitution made under Article 368 Right of Equality

[8] Ashish Chugh, Fundamental Rights: Vertical or Horizontal?, (2005) 7 SCC (J) 9.

[9] Abolition of Untouchability: Untouchability is abolished and its practice in any form is forbidden. The enforcement of any disability arising out of Untouchability shall be an offence punishable in accordance with law

[10] AIR 1997 SC 3011.

[11] Under Article 15 of the Constitution of India.

[12] Tarunabh Khaitan, Reading Swaraj into Article 15: A New Deal for all the Minorities, 2 NUJS L. Rev. 419 (2009).

[13] Justice Sachar Committee Report on the Social, Economic and Educational Status of the Muslim Community of India, available at: http://www.minorityaffairs.gov.in/sites/upload_files/moma/files/pdfs/sachar_comm.pdf (Last visited on 18 March 2014).

[14] Madhav Menon Committee Report on Equal Opportunity Commission: What, Why and How?, available at:  http://usindiapolicy.org/documents/inclusion/EOC-Report-MMA.pdf (Last visited on 18 March 2014).

[15] Govt clears Panel to check Discrimination against Minority, The Indian Express, 20 February 2014, available at: communitieshttp://indianexpress.com/article/india/india-others/govt-clears-panel-to-check-discrimination-against-minority-communities/ (Last visited on 18 March 2014).

[16] Rafiq Dossani, The Future of Indian Muslims, Stanford Journal of Muslim Affairs, available at: http://iis-db.stanford.edu/pubs/23275/2011Spring_Avicenna_DossaniRafiq.pdf (Last visited on 18 March 2014).

 

 

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The Zoroastrian Co-operative Housing Society Limited case narrowed down the scope of constitutional interpretation. However, with the coming of the EOC, the right to housing has to be construed as a constitutional guarantee and only when this is done can the principle of minority protection, which is one of the foremost responsibilities of the Constitution, be said to have been achieved to an extent.

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Property Rights of an Unborn Child in India

While most debates surrounding the existence of a person before birth and after death are theological or philosophical in nature which could go on endlesslythe debate concerning the right of yet-to-be-existent person needs to be settled conclusively. Especially, ascertaining property rights of an unborn is essential as it has a direct implication on the rights of other existent individuals. Although the Indian laws recognize the existence of an unborn as a legal person, rights are not granted until the birth of the child. Further, while a child in a mother’s womb is considered as person for many purposes, the extent of the unborn child’s personal or proprietary rights has not been categorically determined. The unborn is regarded by legal fiction as already born for creation of interest in property.  

Moreover, the right to life has been guaranteed as a fundamental right to everyone under Article 21 of the constitution of India, which may be deemed to include an unborn child. Renowned scholars have also opined that ‘the State should not discriminate between persons who have taken birth and persons who are still in the womb of a mother’. Therefore, the State is under an obligation under Article 21 not only to protect the life of an unborn child from arbitrary and unjust destruction but also not to deny it equal protection under Article 14.i  

Further, judicial pronouncements have tried to shed some light on the status and rights of an unborn child. In the case of Tagore V. Tagoreii, the Supreme Court observed that foetus/infant in a womb is a person in existence for the purpose of making a gift to an unborn child. Subsequently, in the case of Jabbar V. Stateiii, the Court has also held that the term ‘person’ would include an unborn child in the mother’s womb after seven months of pregnancy. This would mean that it is capable of being spoken of as a person if its body is developed sufficiently.  

Property Rights of an Unborn under the Transfer of Property Act, 1884 (“TP Act”): 

Under the Transfer of Property Act, 1882, any property (movable or immovable) can be bequeathed in favour of an unborn child. However, an interest created in favour of an unborn is contingent on the occurrence of birth. Further, interest cannot be transferred directly to an unborn, it must be transferred to another living person or a trust must be created for the purpose.  

Section 13 of the Transfer of Property Act reads as follows: 

‘Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transfer in the property.’ 

As the above provision defines an unborn child is a child or a baby in its mother’s womb. A person yet to be born does not have any existence and is not counted as a living person, still the property can be transferred to the unborn child/baby. 

Section 20 of the Transfer of Property Act reads as under:  

Where, on a transfer of property, an interest therein is created for the benefit of person not then living, he acquires upon his birth, unless a contrary intention appears from the terms of the transfer, a vested interest, although he may not be entitled to the enjoyment thereof immediately on his birth.’ 

Therefore, an unborn child i.e. an Infant En Ventre Sa mere can attain definite rights and inherit property only if he/she is born alive and such rights can be vested in the hands of his/her trustees.   

Conditions required for the transfer of property to an unborn child: 

  1. Absolute interest must be made in the favour of unborn child; 
  1. Creation of prior life interest in favour of a person who is in existence on the transfer date. 

As soon as the unborn child takes birth, the property rights immediately get transferred in his/her name. Post which he or she will be the sole owner of the property. 

Property Rights of an Unborn under the Hindu Succession Act, 1956: 

According to the Mitakshara school of law, a son by birth acquires an interest in the ancestral property of the joint family. Whereas, under the Dayabhaga school, the son has no automatic ownership right by birth but acquires it on the demise of his father.iv 

The conflict has been somewhat resolved by the express acknowledgment under Section 20 of the Hindu Succession Act, 1956 which recognises the rights of a child in the womb; 

A child who was in the womb at the time of the death of an intestate and who is subsequently born alive shall have the same right to inherit to the intestate as if he or she had been born, before the death of the intestate, and the inheritance shall be deemed to vest in such a case with effect from the date of the death of the intestate.’ 

In the case of FM Devaru Ganapati Bhat V. Prabhakar Ganapati Bhatv, the Court held that ‘There is no ban on the transfer of an interest in favour of an unborn person. Section 20 permits an interest being created for the benefit of an unborn person who acquires interest upon his birth. Where the donor gifted the property in favour of the appellant, then living, and also stipulated that if other male children are later born to her brother they shall be joint holders with the appellant, the court also held that such stipulation is not hit by Section 13 of the Act. Creation of such a right is permissible under Section 20 of the Act. 

Mulla on Hindu Law, Fifteenth Edition, contains a commentary by the author while dealing with Section 20 of the Hindu Succession Act, 1956  The commentary reads thus: 

It is by fiction or indulgence of the law that the rights of a child born justo matrimonio are regarded by reference to the moment of conception and not of birth and the unborn child in the womb if born alive is treated as actually born for the purpose of conferring on him benefits of inheritance. The child in embryo is treated as in esse for various purposes when it is for his benefit to be so treated. This view is not peculiar to the ancient Hindu law but one which is adopted by all mature systems of jurisprudence. This section recognises that rule of beneficent indulgence and the child in utero although subsequently born is to be deemed to be born before the death of the intestate and inheritance is to be deemed to vest in the child with effect from the date of the death of the intestate.” 

 

Therefore, it is pertinent that the status of a human being in the making and the related rights are expressly clarified through adequate legislation. Judicial pronouncements, though binding, have been varying and evolving. In a country where even a defamed deceased has right to sue, it is essential that the property rights of future citizens are secured adequately.  

 

Image Credits: Photo by Ashton Mullins on Unsplash

It is pertinent that the status of a human being in the making and the related rights are expressly clarified through adequate legislation. Judicial pronouncements, though binding, have been varying and evolving.

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