N Srinivas vs. The State Of Andhra Pradesh

Held

The Court held that the COVID-19 pandemic and the consequent lockdown, imposed under the Disaster Management Act, 2005, constituted a force majeure event. It emphasized that Section 72 of the Disaster Management Act, 2005, grants it overriding effect over other laws and instruments. Therefore, the lockdown orders and guidelines issued under this Act would prevail over the auction conditions. The Court found that the petitioner's failure to enter into the formal agreement was due to these unavoidable circumstances, and there was no willful default on his part. Consequently, the respondents could not take shelter under Condition No. 38 or 43 of the tender conditions to refuse the petitioner's request or forfeit his deposit. However, the Court did not accept the petitioner's request for permission to collect usufruct for future years, as he had only paid 1/4th of the auction sale amount. The Court directed the respondent authorities to return the Rs. 6.00 lakhs deposited by the petitioner within six weeks, with interest at 6% per annum if not paid within the stipulated time. No costs were awarded.

Facts

The petitioner was the highest bidder for collecting cashew usufruct from a plantation for Rs. 24.00 lakhs. He paid Rs. 6.00 lakhs (1/4th of the bid amount) and was required to deposit the balance 3/4th sale amount, 5% GST, and 10% security deposit within 50 days, by April 18, 2020. However, due to the COVID-19 lockdown, which commenced on March 25, 2020, and extended until May 31, 2020, and further until June 30, 2020, the petitioner could not arrange funds or enter into the formal agreement. The respondent authorities cancelled the tender on May 7, 2020, forfeiting the amount paid and proceeded to recover the loss. The petitioner sought to declare this action illegal and arbitrary, praying for the cancellation order to be set aside and for permission to collect usufruct for the next season.

Key Issues

1. Whether the cancellation of the tender and forfeiture of the petitioner's deposited amount by the respondent authorities, despite the COVID-19 lockdown, was illegal and arbitrary, considering the overriding effect of the Disaster Management Act, 2005? (Question of law) 2. Whether the petitioner is entitled to any relief, including the return of the deposited amount or permission to collect usufruct for the next season, given the circumstances of the lockdown? Petitioner's Arguments: The petitioner argued that the lockdown, imposed under the Disaster Management Act, 2005, constituted a force majeure event. This Act has overriding effect over other laws and contractual conditions, as per Section 72. Therefore, his inability to comply with the payment and agreement deadlines was due to circumstances beyond his control. He relied on the principle of force majeure and the overriding effect of the Disaster Management Act, 2005, citing the case of Devashree Ispat Private Limited v. State of Telangana. He contended that the respondents' action was arbitrary and violated this Court's previous orders regarding the lockdown. Revenue/State's Arguments: The respondents contended that the petitioner failed to comply with the tender conditions, including timely payment and entering into an agreement. They argued that the petitioner was trying to take shelter under the guise of the COVID-19 situation, which was untenable. They also pointed to Condition No. 43 of the sale notice, which stated the corporation would not be responsible for losses due to unforeseen calamities. They asserted that the petitioner did not avail of the extended time granted to contractors and that claiming undue advantage under the COVID-19 situation was punishable.