India invokes force majeure for West Asia conflict, allows 2-4 month contract extensions without penalties

The clause allows relief in extraordinary circumstances beyond human control, such as war, and frees parties from contractual liability NEW DELHI: The West Asia conflict should be treated as a "war" to invoke the 'force majeure' clause in public contracts where obligations have been impacted by disruptions, the finance ministry has said. It has allowed govt entities to extend contractual timelines by two to four months, without penalties, in cases where supply chain disruptions have affected execution. Industry executives said this would be a major relief for companies and contractors in sectors like defence, drone manufacturing, fertiliser and chemicals. The office memorandum issued by the department of expenditure says, "In cases where disruptions arising from the prevailing West Asia situation have directly affected or consequentially impacted contractual obligations (for goods and services contracts, construction/works contracts with govt agencies), the procuring entities may invoke 'force majeure'." The clause allows relief in extraordinary circumstances beyond human control, such as war, and once invoked, it "frees parties from contractual liability and obligation". The ministry specified that relief can be provided only in cases where companies or contractors had to complete obligations on or after Feb 27. The invocation of 'force majeure' would be considered valid only where parties were not in default as on Feb 27, it said. The department said the clause wouldn't absolve the non-performances that were not directly attributable to the West Asia situation. The period of extension will be given on a case-by-case basis by the procuring entity. Welcoming the decision, the president of Drone Federation India, Smit Shah, said on X, "Many Indian drone companies have govt contracts, and because of the ongoing conflict in West Asia, their supplies and deliveries have been badly affected. They were worried about heavy penalties for delays that were not even their fault... (The govt decision) gives relief to our member companies and sends a strong message that govt stands with the Indian industry during difficult times."