If an Indian company gets distressed, the liability of the management is two-fold:
An employer-employee risk – the management is responsible for ensuring that a safe working environment is maintained, and the company adheres to regular directions and guidelines issued by government agencies while tackling this pandemic situation. The management has to ensure that all reasonable steps / actions (such as sanitization, work from home directives, spreading awareness, precautionary measures etc.) should be taken to tackle the COVID-19 outbreak; and
A business risk – there is a risk of business being adversely affected or disrupted which could have a cascading effect on dependent vendors who are part of the business value chain. Counter parties to supply contracts may use the COVID-19 outbreak as a reason to delay or suspend performance which in turn will have an impact on the company meeting customer demands / contracts. This may be done by the counterparties without attracting any consequences – by taking benefit of a force majeure clause or if such clause is absent, by applying the concept of frustration of a contract. While, enforceability of a force majeure clause or frustration of contract will be subject to the facts of each case, there will still be an adverse impact on the business.