Delhi High Court has held that tenants cannot invoke Force Majeure and claim suspension of rent owing to the lockdown, when they continue to occupy the rented premises.
However providing some relief to the tenants, the Single Bench of Justice Prathiba M Singh noted that some postponement or relaxation in the schedule of payment of rent can be granted owing to the lockdown.
The order has come in an application which raises various issues relating to suspension of payment of rent by tenants owing to the COVID-19 lockdown crisis and the legal questions surrounding the same.
The application sought a suspension of the direction passed by the HC in 2017 to pay rent at the rate of Rs 3.5 lakhs per month for a property in Khan Market, New Delhi as a condition for staying the eviction order passed by the Rent Controller Court. The applicant sought suspension of rent citing the COVID-19 lockdown.
Before moving on to the merits of the application, the court made the following preliminary observation:
'The question 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. 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.'
The counsel for the tenant had sought waiver of rent, or some partial relief such as postponement of payment, on the ground that the lockdown has caused serious damages to the business.
On the other hand, the landlord's counsel argued that mere disruption of the business cannot exempt the Tenants from making the monthly payments as the Landlord also depends on the income from the tenanted premises.
Doctrine Of Frustration Under Section 56 Of Contract Act Not Applicable To Lease Agreements : Delhi HC [Read Judgment]
After taking these submissions into consideration, the court analysed sections 32 and 56 of the Indian Contract Act to note that section 56, which talks about frustration of the contract caused by an impossibility to perform the duty, would not apply to a lease agreement and other similarly situated contracts which are `executed contracts' and not `executory contracts'
The court observed:
"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."
After this, the court looked into the issue of doctrine of force majeure. The court looked into section 108(B)(e) of the Transfer of Property Act to observe that the said provision would apply only in the absence of a contractual stipulation.
The court noted:
'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.'