No Waiver Of Rent Due To Covid-19 Pandemic or Lockdown: Delhi HC
Ramanand & others vs. Dr. Girish Soni and Another, Delhi HC
Facts
- This urgent application was moved before Delhi High Court on various issues relating to suspension of payment of rent by tenants owing to the COVID-19 lockdown crisis.
- The tenant was in the possession of property which was leased to him in 1975. In 2008, the Respondents filed an eviction petition under Section 14(1)(e) of the Delhi Rent Control Act, 1958. In 2017, Decree of eviction was passed. Futher in the month of October 2017, the court stayed the eviction of the tenant and ordered paying to the respondents a sum of Rs.3.5 lakhs per month, month by month, in advance for each month by the 10th day of the English Calendar month.
- Tenant/Appellant Arguments: The stand of the Tenants is that due to the lockdown, there has been complete disruption of all business activities, including the business of the Tenants. It is pleaded that the circumstances are force majeure (“an event
or effect that can be neither anticipated nor controlled”) and beyond the control of the Tenants. Thus, it is claimed that the Tenants are entitled to waiver of the monthly payment directed by the court to pay Rs. 3,50,000 or at least some partial relief in terms of suspension, postponement or part-payment of the said amount. - Landlord/Respondent Arguments: Counsel appearing for the Landlord submitted that the amount fixed by this Court i.e., Rs.3,50,000/- per month, is a very meagre (very less) amount compared to the prevalent market rate. He cites the example of Shop No.33 in Khan Market for which the monthly rent is approximately Rs.22 lakhs for a 1,456 sq. feet property. He further submits that the Landlord is a Dentist who needs the shop for his own bona fide use.
References
- Energy Watchdog v. CERC & Ors., (2017) 14 SCC 80
The Supreme Court in Energy Watchdog v. CERC & Ors., (2017) 14 SCC 80 has clearly held that in case the contract itself contains an express or implied term relating to a force majeure condition, the same shall be governed by Section 32 of the ICA. Section 56 of the ICA, which deals with impossibility of performance, would apply in cases where a force majeure event occurs outside the contract.
2. Raja Dhruv Dev Chand v. Raja Harmohinder Singh & Anr., AIR 1968 SC 1024
There are various conditions that have to be fulfilled to satisfy the conditions of `impossibility’ under Section 56. Agreement to do impossible act. — An agreement to do an act impossible in itself is void. Contract to do an act afterwards becoming impossible or unlawful. — A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
In this case, the Supreme Court had the occasion to consider this doctrine in the case of Raja Dhruv Dev Chand v. Raja Harmohinder Singh & Anr., AIR 1968 SC 1024 the Court held that Section 56 does not apply to lease agreements. From the above judgments and the settled law, it is clear that Section 56 of the ICA would not apply to a lease agreement
3. In Raichurmatham Prabhakar and Ors. v. Rawatmal Dugar, (2004) 4 SCC 766 the Supreme Court held that suspension of rent may be claimed by the tenant if the lessee has been dispossessed. Thus, mere non-use may not always entitle the tenant for suspension of rent.
4. In Raja Dhruv (supra) the Supreme Court, while interpreting as to what constitutes `substantially and permanently unfit’ held that temporary non-use by the tenant due to any factors would not entitle the tenant to invoke this section.
5. The Court also referred to the Section 108 of Transfer of Property Act. Thus, for a lessee to seek protection under sub-section 108(B)(e), talks about the Rights and liabilities of the lessee–
(e) if by fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void: Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision: …
Judgment
Where there is a contract, whether there is a force majeure clause or any other condition that couldpermit waiver or suspension of the agreed monthly payment, would be governed by the contract entered between the parties. If, however, there is no contract at all or if there is no specific force majeure clause, then the issues would have to be determined on the basis of the applicable law. The force majeure clause inthe contract could also be a contingency under Section 32 which may allow the tenant to claim that the contract has become void (null) and surrender the premises. However, if the tenant wishes to retain the premises and there is no clause giving any respite to the tenant, the rent or the monthly charges would be payable.
The Delhi High Court said the following important points that:
- There is no rent agreement or lease deed between the parties and hence Section 32 of the Indian Contract Act has no applicability. The case is governed by the provisions of the Delhi Rent Control Act, 1958. Section 56 of the Indian Contract Act does not apply to tenancies (As stated by Supreme Court in above mentioned case).
- While referring to the Section 108 of Transfer of Property Act (TPA) Court said that for applicability of Section 108(B)(e) there has to be complete destruction of the property, which is permanent in nature due to the force majeure event. Until and unless there is a complete destruction of the property, Section 108(B)(e) of the TPA cannot be invoked. In the above situation, temporary non-use of premises due to the lockdown which was announced due to the COVID-19 outbreak cannot be construed as rendering the lease void under Section108(B)(e) of the TPA. The tenant cannot also avoid payment of rent in view of Section 108(B)(l).
- Therefore, the Tenants’ application for suspension of rent is thus liable to be rejected because suspension of rent due to force majeure event is no excuse. Also, it is clear from the submissions made that the Tenants do not intend to surrender the tenanted premises.
- However, some postponement or relaxation in the schedule of payment is granted owing to the lockdown to the tenant.
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