Case Name: Ramanand and Others v. Dr. Girish Soni and Another

Citation: (RC. Rev. 447/2017) - Court: High Court of Delhi - Coram: Justice Prathiba M. Singh

The novel Corona Virus has stalled all the commercial activities throughout the world. All kinds of businesses have been significantly hit by the disruption caused by the pandemic. Consequently, the commercial lease agreements in India have been severally affected due to the ongoing COVID-19 crises. On 21st May 2020, the High Court of Delhi in Ramanand and Others v. Dr. Girish Soni and Another[1] has tried to delve into the legal position of the Force Majeure viz a viz Lease Agreements thereby putting many woes of landlords and tenants at rest.

Facts
The Respondent/ Landlord (hereinafter referred to as ‘Landlord') leased the property bearing number Shop No. 30-A, Khan Market, New Delhi (hereinafter referred to as ‘tenanted premises') to the Appellants/Tenants (hereinafter referred to as ‘Tenants'). The tenanted premises were given on rent to the Tenants for commercial purposes vide a lease deed executed on 1st February 1975 at Rs.300/- per month.

The Landlord, in 2008, filed an eviction petition under Section 14(1) (e) Delhi Rent Control Act, 1958 against the Tenants. The decree of eviction was granted against the tenants by the Ld. Senior Civil Judge-cum-Rent Controller (hereinafter referred to as Rent Controller) vide the order dated 18th March 2017 (hereinafter referred to as impugned order).

The Tenants moved the Delhi High Court by way of a Revision Petition challenging the impugned order. On 25th September 2017, the Delhi High Court stayed the eviction decree on the condition that starting from the month of October 2017; the Tenants shall pay, to the Landlord, a sum of Rs. 3.5 lacs per month by the 10th day of English Calendar month.

Owing to the COVID-19 crisis, the Tenants moved an Urgent Application in the Delhi High Court praying for suspension of rent on the ground that the lockdown has disrupted their business activities.

The Delhi High Court dismissed the said Urgent Application vide order dated 21.05.2020.

Observations of the Delhi High Court
The Delhi High Court while referring to an inclusive list of the kinds of leases observed that the question of suspension or waiver of rent applies differently in each category of lease agreements. The Delhi High Court referred to the following meaning of the expression Force Majeure as it is given in the Black's Law Dictionary: ‘an event or effect that can be neither anticipated nor controlled'.

Further, the Delhi High Court relied on Energy Watchdog v. CERC and Others[2] wherein it was held that if there is an explicit and clear term in the contract relating to the Force Majeure condition, then the contract would be governed by Section 32 of the Indian Contract Act, 1872 (hereinafter referred to as ‘ICA') and in cases where the Force Majeure event occurs outside the contract, then the same shall be governed by Section 56 of ICA. Applying the principles of the Energy Watchdog[3], the Delhi High Court in the instant case held that the tenant could claim the waiver or suspension of rent only if the contract consists of a clause which provides for waiver or suspension of rent.

Significantly, the Delhi High Court observed that in cases where the lease agreement/rent agreement is bereft of the Force Majeure clause then the tenant may seek the recourse of Doctrine of Frustration as is encapsulated in Section 56 of ICA.

The Delhi High Court relied on Raja Dhruv Dev Chand v. Raja Harmohinder Singh and Another[4], wherein the Supreme Court of India categorically held that Section 56 of ICA is inapplicable to lease agreements as a lease is a completed conveyance or an executed contract.

The above view of the apex court was reiterated in the cases of T. Lakshmipathi and Others v. P. Nithyananda Reddy and Others[5], and Hotel Leela Venture Ltd. v. Airports Authority of India[6].

The Delhi High Court then elucidated the doctrine of Force Majeure vis a vis Transfer of Property Act, 1882 (hereinafter referred to as ‘TPA'). The doctrine of Force Majeure is recognized in Section 108(B) (e) of the TPA. It was observed that Section 108(B) (e) of the TPA applies only in the absence of stipulated terms in the contract. In Raja[7], the apex court observed that the temporary non-use of the property by the tenant due to any factors would not entitle him to invoke Section 108(B) (e) of TPA.

In Raja[8], it was also held that where the leased property is not destroyed or it is not rendered substantially and permanently unfit due to fire, tempest, flood, violence of an army or a mob, or other irresistible force, then in those cases, the tenant cannot avoid the lease.

Furthermore, the Delhi High Court correctly observed that complete destruction (permanent in nature) of the property, due to the Force Majeure event, is the sine qua non for the tenant to seek the protection of Section 108(B) (e) of TPA. Further, the possibility of suspension of rent due to the temporary non-use of the property was also looked into by the High Court of Delhi. The Delhi High Court, relying on Surendra Nath Bibran v. Stephen Court[9] held that the grant of suspension of rent would depend on facts and circumstances of each case.

It is imperative to note that the Delhi High Court allowed the tenants to postpone the rent and directed the tenants to pay the rent for the month of March 2020 on or before 30th May 2020 and for the months of April 2020 and May 2020 by 25th June 2020.

Conclusion
This decision of the Delhi High Court has cleared the air on the applicability of Section 32 of ICA, Section 56 of ICA, and Section 108(B) (e) of TPA on the lease agreements. It is now clear by the aforesaid decision that Section 56 of ICA does not apply to lease agreements. Further, the applicability of Section 108(B)(e) of TPA is subject to the leased property being substantially and permanently destructed due to the ‘Force Majeure' event.

End-Notes:

1. RC. Rev. 447/2017
2. (2017) 14 SCC 80.
3. Ibid.
4. AIR 1968 SC 1024.
5. (2003) 5 SCC 150.
6. 2016 (160) DRJ 186.
7. Supra, note 3.
8. Ibid.
9. AIR 1966 SC 1361.