This article is written by Karan Grover, an Advocate based out of Delhi, currently working as a Legal Counsel with Legal Icons Law Firm.
The Hon’ble High Court of Delhi in the matter of Ramanand & Others vs. Dr. Girish Soni & Another; RC. REV. 447/2017, was confronted with the issues relating to suspension of payment of rent by tenants owing to the COVID-19 lockdown crisis and the legal questions surrounding the same. We are all aware that the questions as to whether the lockdown would entitle tenants to claim waiver or exemption from payment of rent or suspension of rent, is bound to arise in thousands of cases across the country. The Hon’ble High Court in the above matter observed that though there can be no standard rule that can be prescribed to address these cases, some broad parameters can be kept under consideration, in order to determine the manner in which the issues that arise can be resolved. Therefore, while deciding the application on behalf of the tenants for suspension of payment of rent due to lockdown, the Ld. Single Judge has elaborately discussed the law concerning the issues and has laid down certain factors in order to decide the issue in hand in its Order, dated 21.05.2020.
Facts of the case
Respondents are the owner of a shop at Khan Market, where the Petitioners are tenants. Petitioners in March, 2018 approached Hon’ble High Court of Delhi in a Revision Petition against an order of eviction passed by Rent Controller. Eviction of the Petitioners from the premises was stayed as an interim relief, subject to payment of Rs.3.5 lakhs per month till the petition is finally decided.
An application was filed by the Petitioners in the pending Revision Petition, seeking suspension of rent, during the lockdown period following the outbreak of COVID-19. The Petitioners have pleaded Force Majeure as there has been disruption of business activities owing to lockdown.
Respondents submitted that the rent fixed by this Hon’ble Court vide its interim Order itself is meagre amount as compared to prevailing market scenario and also produced a copy of Lease Deed of a neighboring shop in which agreed rent was Rs.22 lakhs per month for 1,456 square feets property. Further, they submitted that Force Majeure does not apply to the present matter as the subject matter of the petition pertains to Delhi Rent Control Act. Further, the Respondent once again urged his need for the possession of the shop for his own bona fide use and stated that his livelihood also depends on the rent received.
Applicable law and precedents
The Ld. Single Judge expressed that the plea of tenants for suspension or waiver from payment of rent, depends on the relationship between a Landlord and Tenant, a Lessor and Lessee and a Licensor and Licensee, which can be in multifarious forms. These relations are primarily governed either by contracts or by law.
In the realm of contracts, the respective rights and obligations of the parties would be determined by the terms and conditions of the contract itself. The question of waiver, suspension or any remission in the rental payments would operate differently for each agreements. 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 Ld. Single Judge while relying upon the judgment of Hon’ble Supreme Court in Energy Watchdog v. CERC & Ors., (2017) 14 SCC 80 has expressed that tenants/lessees or other similarly situated parties, could seek waiver or non-payment of the monthly amounts, under contracts which have a Force Majeure clause as it would attract Section 32 of the Indian Contract Act, 1872. On the other hand Section 56 of the ICA, which deals with impossibility of performance, would apply in cases where a Force Majeure event occurs outside the contract.
The fundamental principle would be that if the contract contains a clause providing for some sort of waiver or suspension of rent, only then the tenant could claim the same. The Force Majeure clause in the contract could also be a contingency under Section 32 which may allow the tenant to claim that the contract has become void 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.
In the absence of a contract or a contractual term which is a Force Majeure clause or a remission clause, the tenant may attempt to invoke the Doctrine of Frustration of contract or `impossibility of performance’, which however would not be applicable in the matter of lease of immovable property in view of the settled legal position set out by the Hon’ble Supreme Court. In the context of a tenant’s obligation, the Hon’ble Supreme Court had the occasion to consider the doctrine of frustration in the case of Raja Dhruv Dev Chand v. Raja Harmohinder Singh & Anr., AIR 1968 SC 1024, where the tenant who had rented agricultural lands in Punjab which he could not utilize due to the 1947 Partition and sought refund of the rent paid by him for the said land for Kharif season 1947 and Rabi season 1948. In the above judgment, Hon’ble SC laid down unequivocally that a lease is a completed conveyance, despite it involving monthly payment of rent and hence, Section 56 cannot be invoked to claim waiver, suspension or exemption from payment of rent. The Hon’ble SC, while drawing a distinction between a `completed conveyance’ and an `executory contract’ held that Section 56 does not apply to lease agreements as the same fall under the former category and not under the latter one. The Hon’ble Supreme Court has reiterated its above view in T. Lakshmipathi and Ors. v. P. Nithyananda Reddy and Ors., (2003) 5 SCC 150. Further, the Single Judge also discussed a decision of the Division Bench of the Delhi High Court in Hotel Leela Venture Ltd. v. Airports Authority of India, 2016 (160) DRJ 186 pertaining to the present issue in hand.
The learned Single Judge also discussed the applicability of provisions of the Transfer of Property Act, 1882 governing landlord-tenant relationships, in the absence of contracts or contractual stipulations. The doctrine of Force Majeure is recognized in Section 108(B)(e) and 108(B)(l) of the TPA, which would again apply in the absence of any contractual stipulation. A reading of Section 108(B)(e) clearly shows that on the occurrence of any of the situations contemplated like fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, as stated under sub clause (e), which would render the property ‘substantially and permanently unfit’ to be used for the purpose for which it was leased, at the option of the lessee, the lease would be void.
The Hon’ble Supreme Court in Raja Dhruv (supra), 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. The learned Single Judge also discussed the judgment of Hon’ble SC in the T. Lakshmipathi (supra) and Shaha Ratansi Khimji & Sons v. Kumbhar Sons Hotel Pvt. Ltd. & Ors., (2014) 14 SCC 1 on the question of what constitutes permanent destruction of a property and the same not being applicable to present circumstances created due to lockdown. The Single Judge also discussed the decision of another Single Judge of the same Court in the matter of Sangeeta Batra v. M/s VND Foods & Ors., (2015) 3 DLT (Cri) 422 on the interpretation of Section 108 of TPA, wherein it has been held that the leased premises, intended to be run as a restaurant, was sealed on two occasions is of no relevance as the tenants did not choose to avoid the lease.
Thus, Single Judge is of the view that for a lessee to seek protection under sub-section 108(B)(e), there has to be complete destruction of the property, which has to be permanent in nature due to the claimed 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 view of the above settled legal position, 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 Section 108(B)(e) of the TPA. The tenant cannot avoid payment of rent in view of Section 108(B)(l).
Finally, in the absence of a contract or a contractual stipulation, as in the present case, the tenant may generally seek suspension of rent by invoking the equitable jurisdiction of the Court due to temporary non-use of the premises. The question as to whether the suspension of rent ought to be granted or not would depend upon the facts and circumstances of each case as held by the Hon’ble Supreme Court in Surendra Nath Bibran v. Stephen Court, AIR 1966 SC 1361, where the Court directed payment of proportionate part of the rent as the tenant was not given possession of a part of the property. Further, 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. In Aranya Hospitality Management Services Pvt. Ltd. v. K. M. Dhoundiyal & Ors. [Arb. A. (Comm.) 6/2017, the ld. Single Judge of the Delhi High Court held that under circumstances wherein the tenant cannot use the property for the purpose for which it was leased, the tenant would have no right to continue enjoying the property and seek suspension of rent at the same time.
After observing the above legal position, the learned Single Judge observed that in the facts of the case, where there is no rent agreement or Lease Deed between the parties, hence, Section 32 of the ICA has no applicability. Further, the subject premises is governed by the provisions of the Delhi Rent Control Act, 1958 therefore, Section 56 of the ICA does not apply to tenancies. The Petitioners have also not urged that the tenancy is void under Section 180 (B)(e) of the TPA. Further, it was observed that the Petitioners are also not `Lessees’ as an eviction decree has already been passed against them. Therefore, the Ld. Single Judge in order to decide the relief of suspension of rent took the following factors into consideration:
- Nature of the property,
- Financial and social status of the parties,
- Amount of rent,
- Other factors (relating to any dispute between the parties under the lease/ arrangement),
- Any contractual condition(s) (relating to non-payment or suspension of rent),
- Protection under any executive order(s) (like extended to students/migrant labour by the MHA).
The Learned Single Judge after taking into consideration the following factors vis-à-vis the facts of the present case, rejected the application of the Petitioners while granting them some postponement or relaxation in the schedule of payment of rent.
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