No suspension/reduction/ waiver of rent in lockdown period without surrender of possession, force majeure is not applicable: Delhi HC passes detailed judgment

The Delhi High Court on May 21, 2020 {RAMANAND & ORS. vs DR. GIRISH SONI & ANR.} held that as per settled law, laid down by Supreme Court,  unequivocally a lease is a completed conveyance though it involves monthly payment and hence, Section 56 (Force Majeure) of the Contract Act cannot be invoked to claim waiver, suspension or exemption from payment of rent by the tenant. 

The Single Judge of HC, Justice Prathiba M. Singh, further held 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. It was held that the force majeure clause in the contract could also be a contingency under Section 32 of the Contract Act 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, it was held that the rent or the monthly charges would be payable.

EFFECT OF SEC 108 TP ACT

The HC observed that in Shaha Ratansi Khimji & Sons v. Kumbhar Sons Hotel Pvt. Ltd. & Ors., (2014) 14 SCC 1, the Supreme Court clarified that in cases concerning a lease agreement, Section 108(B)(e) of the TPA cannot be interpreted by assuming that when a building or structure is leased out, it is only the superstructure that is exclusively leased out. The lease is also a lease of site. In view of the law laid down in T. Lakshmipathi and Ors. v. P. Nithyananda Reddy and Ors., (2003) 5 SCC 150, it was held by the SC that even though the tenanted premises had been demolished and destroyed, the tenancy cannot be said to have been determined.

It was also observed that more recently, this view has been reaffirmed by the Delhi High Court in Sangeeta Batra v. M/s VND Foods & Ors., (2015) 3 DLT (Cri) 422, wherein it has been held that the fact 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.

It was held by the HC that for a lessee to seek protection under sub-section 108(B)(e), there has to be complete destruction of the property, which is permanent in nature due to the force majeure event. It was also held that until and unless there is a complete destruction of the property, Section 108(B)(e) of the TPA cannot be invoked. It was held that 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. It was held that the tenant cannot also avoid payment of rent in view of Section 108(B)(l).

It was observed that the view has also been followed by an another ld. Single Judge of the High Court in Aranya Hospitality Management Services Pvt. Ltd. v. K. M. Dhoundiyal & Ors. [Arb. A. (Comm.) 6/2017, decided on 21st March, 2017], where the Court considered the force majeure clause of the contract to hold that the mere non-approval by the concerned authority for running a restaurant would not entitle the tenant to seek suspension of rent. It was held in the said case by the HC that 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.

In the present case, the urgent application under consideration before the HC, raised issue relating to suspension of payment of rent by tenants owing to the COVID-19 lockdown crisis and the legal questions surrounding the same. The question as to whether the lockdown would entitle tenants to claim waiver or exemption from payment of rent or suspension of rent in the cases of tenant who suffered eviction order under DRC Act and are enjoying possession of property in view of interim protection granted by HC (subject to payment of market rent) are liable to seek suspension of payment of market rate of rent, is in issue in present case before the Delhi HC.

In the present case, it was held by the HC that the tenants are `unauthorised occupants’ of the tenanted premises as a decree of eviction has already been passed. It was held that the monthly payment of rent being made has been fixed by the Court vide the interim order in view of the judgment of the Supreme Court in Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd., (2005) 1 SCC 705. It was held that the use and occupation charges have to be determined in a manner so as to fully compensate the Landlord as if the Landlord had let out the property to a third party. It was held that the Tenants are continuing to occupy the premises and do not intend to vacate the same. It was held that, in any case, the compensation ought to be reasonable and should make up for the loss caused to the Landlord due to delay in execution of the eviction decree. It was held that these factors completely tilt the balance in favour of the Landlord.

Accordingly, in view of settled legal position, the Delhi HC in present case held that the Tenants’ application for suspension of rent is thus liable to be rejected inasmuch as while invoking the doctrine of suspension of rent on the basis of a force majeure event, it is clear from the submissions made that the Tenants do not intend to surrender the tenanted premises. It was held that while holding that suspension of rent is not permissible in these facts, some postponement or relaxation in the schedule of payment can be granted owing to the lockdown. Accordingly, the request of waiver/ suspension/ reduction of rent during lockdown period by the tenant(s) was rejected by the Delhi HC in present case.