| Date | Version | May 30, 2022 | 1.0 |
| Keywords | Force Majeure, Force Majeure Event (FME), Strict Liability |
| List of Legislation Referred |
|
| Jurisdiction | India |
Abstract
This write-up examines the efficacy of the Force Majeure provisions under the Petroleum and Natural Gas Regulatory Board (Authorizing Entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution Networks) Regulations, 2008 and the associated PNGRB Force Majeure Guidelines.
Why Force Majeure?
Force Majeure provisions seek to balance contractual obligations against events that are beyond the reasonable control of the affected party. While strict liability may appear attractive for public infrastructure projects, excessive rigidity may render projects economically unviable and discourage investment.
A balanced Force Majeure regime allows legitimate relief where performance becomes impossible due to extraordinary circumstances while maintaining accountability for project execution.
Existing Force Majeure Framework
The CGD Authorisation Regulations define Force Majeure in a restrictive manner and cover only specific categories of events, including:
- War and hostilities.
- Major riots and civil commotion.
- Earthquakes, floods, tempests, lightning and other natural physical disasters.
- Government-imposed restrictions arising after submission of bids that prevent or delay performance.
The regulations provide that where an authorised entity is unable to perform its obligations due to a Force Majeure Event (FME), the affected obligations may be suspended for the duration of such event, subject to the approval of the PNGRB.
PNGRB Force Majeure Guidelines
The PNGRB has prescribed a procedure for seeking relief from delays caused by Force Majeure Events.
- Notification of the Force Majeure Event within 15 days of occurrence.
- Submission of supporting documents and relevant particulars.
- Notification of termination of the Force Majeure Event within 15 days.
- Verification and assessment by PNGRB.
- Possible grant of extension and restoration period by PNGRB.
The Board may consider information submitted by the authorised entity as well as information independently available to it before granting any relief.
Points to Ponder
The article identifies several concerns with the current Force Majeure regime:
- The definition of Force Majeure is exhaustive and may exclude significant events such as terrorism.
- The expression “natural physical disasters” may give rise to interpretational disputes.
- Man-made disasters and certain catastrophic events may not fall within the definition.
- No prescribed timeline exists for PNGRB to decide Force Majeure claims.
- The relationship between the Regulations and the Guidelines may create legal uncertainty regarding restoration periods.
- Potential inconsistency exists in the interpretation of “relative obligations” and the duration of suspension.
Way Forward
The article concludes that there is a pressing need to revisit the existing Force Majeure framework under the CGD Authorisation Regulations. A more practical and commercially balanced regime would reduce unnecessary disputes and enable industry participants to focus on business operations rather than regulatory challenges.
Clarification of ambiguities, expansion of the definition of Force Majeure Events, and alignment between the Regulations and the PNGRB Guidelines would contribute towards a more effective and predictable regulatory framework.
