Page 22 - August-2020-Issue

ARTICLE

Halliburton v Vedanta:

Performance bonds and

COVID-19

Shourav Lahiri
Barrister-at-law,
Atkin chambers, London

Shourav Lahiri examines the interesting issues of law raised by the recent ad- in-
terim injunction granted by the Indian courts against a call on performance bonds
due to circumstances caused by COVID-19.

he New Delhi High Court application was lodged earlier submissions, the Court held
issued an ad-interim this month, Halliburton was tech- that, in addition to fraud, Indian
T(temporary) injunction nically in delay. law allowed a bond call to be
restraining Vedanta from call- Halliburton asserted that its de- restrained if “special equities”
ing performance bonds issued lay had been excused by the ex- could be shown. Treating the
by Halliburton (Halliburton tension of time granted until 31 lockdown due to COVID-19 as
Offshore Services v Vedanta March 2020, a matter that Vedanta “unprecedented, and .. incapable
Limited (O.M.P. (I) (COMM) & disputed. On 18 and 25 March of having been predicted” by ei-
I.A. 3697/2020). What is inter- 2020, shortly before Halliburton ther party, the court seemed to be
esting about this decision, and took out its injunction applica- of the view that “special equities”
one which raises as many ques- tion, and before the asserted had been established in the pres-
tions as it answers, is that it was period of extension of time ex- ent case.
based on the lockdown in India pired, Halliburton gave notice of At first blush, this decision may
due to COVID-19 constituting force majeure to Vedanta based appear obvious. The COVID-19
a force majeure event excusing on the COVID-19 related lock- pandemic has caused serious
Halliburton from having to con- down in India. disruption to the supply chain of
tinue to perform its obligations Vedanta’s submission was that labour and materials. Halliburton
during the period of lockdown. the only basis on which the court had argued that, as at 18 March
The facts are these: Halliburton could interfere with the call was 2020, the date on which it gave
was the drilling contractor for if the call was fraudulent, which Vedanta the force majeure notice,
Vedanta on three onshore oil it was not. Vedanta’s submission only between 2.1% and 5.5% of
and gas blocks in the state of was similar to what would be the the work remained to be com-
Rajasthan in India. Under its position had the bonds been gov- pleted. Had it not been for the
contract, Halliburton was sup- erned by English law, as set out lockdown, the works would have
posed to have completed drill- in Edward Owen Engineering v been completed by 31 March
ing of these wells by 16 January Barclays Bank [1978] Q.B. 159 and 2020. Given the circumstances,
2019, 16 March 2019 and 16 June in the cases following. a call on the performance bonds
2019 respectively. Therefore, The New Delhi High Court dis- seemed to be unjustified.
by the time the injunction agreed. Adopting Halliburton’s But could it really be said to

22 KaleidOscope May, 2020