Act of god arguments surface in courts Evaluating loss of limbs in accident

Disputes over delays in the performance of work contracts due to the current pandemic have started surfacing in courts. The contractor often rushes to the court as the employer threatens to terminate the contract and encash bank guarantees. The Delhi High Court, in last week’s judgment, Crsc Research Institute vs Dedicated Freight Corridor Corporation, allowed the government entity to encash bank guarantees, rejecting the prayer for injunction against encashment. The court reiterated the principle that only if there is fraud of an egregious nature or irretrievable loss to one of the parties can courts stop execution of bank guarantees. The bank guarantee clause is considered to be a separate agreement standing apart from the main contract. The contractor in this case had to build 388 km of electric broad gauge rail line. Extensions of time to complete the project were granted earlier, but the last stage was stalled in May this year due to the pandemic. The corporation did not grant extension this time, despite the Act of God clause in the contract and it threatened to terminate the contract.

SC said only if there is fraud of egregious nature or irretrievable loss to one of the parties can courts stop execution of bank guarantees

While calculating compensation for loss of limb in a road accident, courts should take into account the profession or business of the victim and the “income generating capacity” of the victim after the mishap. Thus, loss of one leg to a driver results in loss of total income. Likewise, loss of a functional arm for one involved in a job like a hairdresser or machinist could be disastrous. These observations were made by the Supreme Court while criticising the ruling of the Delhi High Court in a road accident case, Pappu vs Naresh Kumar. The high court had stated that a lawyer’s clerk lost only one arm in an accident and, therefore, he deserved compensation for only one arm. While the medical report stated that his incapacity was 89 per cent, the high court reduced it by half as he had one arm left. The SC found this approach “illogical and unsupportable in law”. It advocated a liberal view. The high court also erred in holding that compensation for loss of future prospects could not be awarded. In addition to loss of future earnings, the victim is also entitled to compensation for loss of future prospects, the court emphasised while directing the insurer to pay ~20 lakh.