Indian steel importers cannot declare force majeure based on the impacts of the coronavirus pandemic to block letters of credit (L/Cs) with South Korean suppliers, the Mumbai High Court has ruled.

The importers - Hariyana International, Integral Industries, Prabhat Steel Traders, Standard Retail and Vinayaga Marine Petro - petitioned the court to block US bank Wells Fargo from encashing L/Cs but the court denied the request.

The petitioners are now expected to move for the case to proceed to an arbitration hearing.

No restrictions

The importers argue that their contracts with South Korea's Hyundai Steel and trading firm GS Global for steel products are unenforceable because of "frustration, impossibility and impracticability" caused by the pandemic and its impacts, particularly lockdowns imposed in India.

The court however found that there are "no restrictions" on steel trading and that all ports and port-related activities, including the movement of vehicles and manpower, container operations, warehouses and customs offices have all been declared essential services.

No rescue

Because the lockdown will only be for a limited period, the court ruled that it could not "rescue" the importers from their contractual obligations.

The bank's L/Cs are independent of the underlying disputes between parties and the sellers had fulfilled their contractual obligations it concluded.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.