Impact Of Pandemic Consequent Lockdown Upon Payment Of Rent

Recently, the Delhi High Court in the case titled “RAMANAND & ORS. Vs. DR. GIRISH SONI & ANR.” comprising of Justice Prathiba M. Singh rejected the application made by the tenant seeking suspension of rent during COVID-19 lockdown. The Hon’ble High Court stated that in the event, the rent or similar contract contains a ‘Force Majeure‘ clause which provides for some kind of waiver and/or suspension of rent, only then the tenant/lessee could claim the same in the present circumstances i.e. the outbreak of COVID-19. However, it has also been stated that and stated that some postponement or relaxation in the schedule of payment can be granted owing to the lockdown.

Justice Prathiba M. Singh went ahead and said that the question of waiver, suspension or any remission in the rental payments would operate differently for each category of agreements. In case there is no contract at all or if there is no specific force majeure clause, then the issues arising will have to be determined on the basis of the applicable law.

Brief Facts:

The dismissed petition was filed by the appellants/tenants challenging the decree of eviction passed by the ld. Senior Civil Judge-cum-Rent Controller in respect of a commercial unit in Khan Market, New Delhi.

In 2008, the respondents filed an eviction petition under Section 14(1)(e) of the Delhi Rent Control Act, 1958. Initially, leave to defend was granted by the Rent Controller on 31st March 2012. However, later vide order dated 18th March 2017 a decree for eviction was passed against the tenants.

Consequently, the tenants filed an appeal against the impugned order which was dismissed by the ld. Rent Control Tribunal on the ground that the same is not maintainable. Hence, the present petition challenging the eviction order. The petition was first listed before the Delhi High Court on 25th September 2017, on which date, the ld. Single Judge had stayed the order of eviction subject to certain terms.

Basis the nationwide lockdown, the tenants moved an urgent application seeking suspension of rent during the lockdown period in order to not fall foul of the eviction order which required it to pay INR 3.5 lakh per month as rent.

The contention of the Tenants:

Due to the nationwide lockdown, there is a complete disruption of business activities undertaken by the Tenants and the same constitutes a force majeure event since the same is beyond their control. Accordingly, such force majeure event entitles the Tenants to claim waiver from the payment of monthly rent or suspension, postponement, or part payment of the amount, as partial relief.

Analysis:

The Delhi High Court analysed the rights and obligation of the landlord and tenant qua force majeure under the provisions of Indian Contract Act, 1872 and Transfer of Property Act, 1882 while determining whether a lessee has a right to claim suspension of rent due to occurrence of a force majeure event.

Relying on the order of the Hon’ble Supreme Court of India in Energy Watchdog Vs. CERC & Ors.[1], the Delhi High Court observed 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 Indian Contract Act, 1872 and such a 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, in case a force majeure event occurs outside the contract, then Section 56 of the Indian Contract Act, 1872, relating to the impossibility of performance, would apply. The fundamental principle is that if the contract contains a clause providing for some sort of waiver or suspension of rent, only then the tenant can claim the same.

Further, relying on the observations of the Hon’ble Supreme Court of India in various cases and its own observation in another case of Sangeeta Batra Vs. VND Foods & Ors.[2], the Delhi High Court held that for a lessee to seek protection under Section 108(B)(e) of TPA, there has to be a complete destruction of the property which is substantial and permanent in nature due to the force majeure event and not just a temporary non-use of the property and then at the option of the lessee, the lease would be void. 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 also avoid payment of rent in view of Section 108(B)(l) unless the parties agree to the contrary.

Conclusion:

The present judgement of the Delhi High Court marks a significant development on the applicability of Sections 32 of the Indian Contract Act, 1872 and eventually, Section 108(B)(e) of the Transfer of Property Act, 1882, in the context of a landlord and a tenant relationship during the Covid-19 pandemic.

The tenants would have to examine the contractual provisions before making a decision on the payment of their rents. As per the judgement, it is evident that it is not an inherent right of the tenant to ask for a deferral of rent from the landlord. Such a direction can only be given by a competent Court of jurisdiction after looking into the facts and circumstances of each case.

[1] (2017) 14 SCC 80

[2] (2015) 3 DLT (Cri) 422