Case Law Details

Case Name : Ramanand & Others Vs Dr. Girish Soni and Another (Delhi High Court)
Appeal Number : RC. REV. 447/2017
Date of Judgement/Order : 21/05/2020
Related Assessment Year :
Courts : All High Courts (5998) Delhi High Court (1604)

Ramanand & Others Vs Dr. Girish Soni & Anr. (Delhi High Court)

FACTS

The Respondent i.e. the Landlord had given the concerned shop on rent for commercial purposes vide a lease deed on 1st February, 1975 to the Appellants i.e. the tenants.

The Respondent thereafter, filed for eviction of the Appellants under Section 14 (1) (e) of the Delhi Rent Control Act, 1958 and an order for eviction was passed on 18th March, 2017 by the Ld. Senior Civil Judge – cum – Rent Controller.

The Appellants filed an appeal against the Order before the Ld. Rent Control Tribunal however, the same was dismissed on 18th September, 2017. The Appellants had therefore, approached the Delhi High Court challenging the said decision. The Single Judge of the Delhi High Court on 25th September, 2017 granted a stay on the order of eviction and directed to pay a rent of Rs. 3.5 Lakhs per months by the 10th of English Calendar month.

An urgent application was filed in light of the various issues relating to suspension of payment of rent by tenants owing to COVID – 19 crisis and the legal questions rising regarding contracts and non-performance of obligations within those contracts.

Therefore, the Appellants seek for waiver of monthly payment of rent as directed on 25th September, 2017 or partial relief in terms of suspension, postponement or part-payment of the rent amount as the situation was beyond the control of the parties and their business was disrupted.

ISSUE BEFORE THE DELHI HIGH COURT

The following issues were considered by the Delhi High Court:

Whether the lockdown would entitle tenants to claim waiver or exemption from payment of rent or suspension of rent?

OBSERVATION

The Appellants submitted that since because of the lockdown, the business operations are shut down, the Appellants are entitled to some remission.

Whereas, the Respondent submitted that the Appellants were enjoying the possession of the property since 1975 and the Appellants are well-to-do business persons, the rent of the shop is way less compared to the prevalent market rate. The Respondent also contended that force majeure did not apply as the lease deed was governed by the Delhi Rent Control Act, 1958.

The Appellants had requested for a rebate for the period of lockdown.

The Court discussed the contractual relationship between a landlord and a tenant or a lessor and lessee where the rights and obligations of parties are determined by the terms of the Agreement. The Court mentioned that suspension or waiver of the rental payments would be different for different types of rental agreements. For example;

  • Contract having a force majeure clause – the contract shall be governed by the clause and can allow suspension / waiver within the said clause; and
  • Contract without a force majeure clause – the contract will have to consider the applicable laws to determine the issue.

The Court further discussed Section 32 and 56 of the Indian Contract Act, 1872, definition of Force Majeure and the relevant judgments to ascertain the situation. The case of Energy Watchdog v. CERC & Ors., (2017) 14 SCC 80 was referred which discussed Section 32 and 56 of the Indian Contract Act, 1872 in consonance with force majeure. The Supreme Court observed:

“34. “Force majeure” is governed by the Contract Act, 1872. Insofar as it is relatable to an express or implied clause in a contract, such as the PPAs before us, it is governed by Chapter III dealing with the contingent contracts, and more particularly, Section 32 thereof. Insofar as a force majeure event occurs dehors the contract, it is dealt with by a rule of positive law under Section 56 of the Contact Act.”

Under Section 32 of the Indian Contract Act, 1872, parties can include a force majeure clause that can exempt the parties from payment of monthly rent during the occurrence of the event and clause can also lead to declaring the Agreement void thereby, surrendering the premises. However if the tenant is willing to keep the premises and the Agreement ongoing, the payment of rent becomes mandatory.

On the other hand, Section 56 of the Indian Contract Act, 1872 suggests invocation of the doctrine of frustration because of the situation of ‘impossibility’. The Court referred to the case of Raja Dhruv Dev Chand v. Raja Harmohinder Singh & Anr., AIR 1968 SC 1024 where the Supreme Court laid down that; 

“…a lease is a completed conveyance though it involves monthly payment and hence, Section 56 cannot be invoked to claim waiver, suspension or exemption from payment of rent. This view of the Supreme Court has been reiterated in T. Lakshmipathi and Ors. v. P. Nithyananda Reddy and Ors., (2003) 5 SCC 150, as also in Energy Watchdog (supra).”

While discussing upon immovable properties, it is impossible to not bring into picture the Transfer of Property Act, 1882. The Court interpreted and discussed Section 108 (B) (e) Transfer of Property Act, 1882 mentioning the doctrine of force majeure and Section 108 (B) (1) of the Transfer of Property Act, 1882 mentioning ‘Rights and Liabilities’ of the lessee. The Court observed that;

“Thus, 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. Until and unless there is a complete destruction of the property, Section 108(B)(e) of the TPA cannot be invoked….”

The Court thereafter, observed the instant issue in light of situations like the present pandemic of COVID – 19 and stated that the suspension or waiver of rent would depend upon the nature of the contract.

The Court opined that such facts and circumstances will not be governed by any force majeure event however, the consequence of the said event has led to the Appellants not earning any profits or not making any sales.

CONCLUSION

The High Court  therefore, took into account the Appellants’ prayer without the applicability of Section 32 of the Indian Contract Act, 1872 as the same is governed by the Delhi Rent Control Act, 1958.

The Court also laid down factors to be considered to determine the questions as to whether the tenant is entitled to any relief or suspension of rent:

  • Nature of the property – the property was located in a prime location i.e. Khan Market of New Delhi;
  • Financial and social status of the parties – the landlord was a dentist and the tenants used to run a footwear shop within the premises since 1975;
  • Amount of rent – the rent amount was fixed Rs. 3.5 Lakhs by the Court and the amount paid by the tenants was at the lower side compared to the prevalent rates in the area;
  • Other factors – tenants were termed as ‘unauthorized occupants’ as the eviction notice was already passed and therefore, the landlord is entitled to get compensation of the loss caused due to the delay in execution of the eviction decree;
  • Any contractual conditions – non such condition within the deed; and
  • Protection under any executive order(s) – the case was not covered by the prevalent orders issued by the Government authorities during the lockdown.

Therefore, considering the situation and factors, the application of the Appellants was rejected. The Court concluded that suspension of rent was not in question however, certain relaxation of the schedule of payment can be granted.

The Court held that;

“It is accordingly directed that the Tenants shall now pay the use and occupation charges 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. From June 2020 onwards, the payment shall be strictly as per the interim order dated 25th September 2017. Subject to these payments being made, the interim order already granted shall continue. If there is any default in payment, the interim order dated 25th September, 2017 would be operational. The said interim order is very clear i.e., if there is any non-payment, the decree would be liable to be executed.”

AMLEGALS REMARKS

The said judgment has brought out a different approach while dealing with the issues between tenants and landlords during the unforeseen situation like the current one. The Court emphasizes on the important of referring the agreements and contracts before resorting to the remedies available under the contract.

Laying down the factors to be considered would prove remarkable and would have put to rest many ongoing disputes on contractual obligations during the COVID – 19 times.

Therefore, the Court while considering the provisions of the Transfer of Property Act, 1882 rightly observed;

“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).”

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One Comment

  1. bc says:

    Dear Sir,
    Tenant (Lessee) Mrs. Zulana Tejashbhai Shah , R/o 701, Krishna Garden Viva Vrindavan Nr. New VIVA college, Vasai Vihar, Municipal Corporation, Thane – 401302, Mumbai, Maharashtra whom we have given Lessors flat on rent
    Address, Bakeri City, Vejalpur, Ahmedabad 380051.

    Lessor wish to state the below given facts regarding failure of payment of dues and multiple dishonor of cheque by the Tenant:- Mrs Zulna Tejas Shah

    1. Lessee (Tenant) has given cheque no. 223249 drawn on Bank of India amounting to Rs. 14000/- for rent of the month of Jan-20 which got bounced and charges of Rs. 177/- was levied to Flat Owner’s account for the reversal.

    2. Post that Lessee made multiple verbal commitment and not paid Rent after stating muliple concerns. Although Lessor have given requested
    time to the Lessee (tenant) and in the of Mar-20, Lessee (tenant) has paid cheque no. 261096 dated 6-Mar-20 drawn on Bank of India amounting to Rs. 42,000/- towards the rent of the months of Jan-20, Feb-20 & Mar-20. The same also got bounced and cheque bounce charges of Rs. 177/- was levied on the same as well.

    3. Then we appraised the issue to theLessee (tenant) and the Lessee (tenant) again given the cheque no. 797314 dated 18-Mar-2020 drawn on Bank of India amounting to Rs. 42,000 for the month for due months as mentioned in point no. 2. Again the cheque got bounced and charges levied to Owner’s Account.

    4. The Lessee (tenant) has submitted a cheque amounting to Rs. 1180/- with Torrent Power for electricity charges for the month of Jan-Feb’20 on 18-Mar-2020 which also got bounced.

    5. Lessee (tenant) submitted a Cheque of Rs. 2000/- which was required to be paid by the Lessee (tenant) to the housing society (“Smarana Cooperative Housing Society”) was also got bounced & charges levied — which have been added by Society under dues of Flat owner as Rs. 2000/-+ cheque dishonor charges.
    After that multiple commitments done by Lessee (tenant) but Payment not done.

    6. Now it may be noted that following payment are dues as on date from the Lessee (tenant):-

    (i) Lease rent of Rs. 1,19,0000/- is due from the lease starting date i.e. 1-Jan-20 to 15th Sep 20.

    (ii) Electricity Charges are also due since 1-Jan-2020 of Rs. 9060/- to till Aug as per Aug20 month Bill.

    (iii) Gas bill for the month of Jan-Feb’20 is due to be paid by the Lessee (tenant) and also the latest pending Adani GAS bill date 8 -aug-20 also due of Rs. 3730/- which is to be paid by Lessee (tenant).

    I have served her notice on 13-Jun-2020 (after his consent & agreement) for payment of dues by 25-Jun-2020 (the date which she & her husband had proposed for payment) and to vacate the flat by 30-Jun-2020, the said notice was duly acknowledged by her , her husband and broker Mr. Vijay Rami. also Lessee (tenant) agreed to pay all dues before 30th June20 & vacate the Flat. But Lessee (tenant) Failed to fulfill both commitment.

    We have approached Lessee (tenant) on 1-Jul-2020 as we have neither received the payment nor the Lessee (tenant) has vacated my flat. On that day Lessor had a discussion with Lessee and Lessee committed to pay the Rs. 40,000/- out of the total outstanding dues under the agreement on 8-Jul-2020 by 7:30 p.m. and the remaining dues as on 31-Jul-2020 including all dues (With Interest & electricity, gas, late payment charges, cheque bounces charges etc.) on 31-Jul-2020 by 7:30 P.M, also confirmed the same in written.

    Again Lessee again failed to fulfill her commitment and requested to Vejalpur Police for time extension also committed in front of Police officers to make all payment by 6th Aug20 and Vacate Flat by 8th-Aug-20 but again Lessee failed to make full payment and vacate Flat / premises (Although on 6th-Aug-20 Lessee (tenant) done partial payment of Rs. 40,000/- against pending Rent), Also further Lessee requested to make all payment within a week time and Vacate Flat but again Failed to make the balance payment and not vacated Flat.

    Although on 17th , Lessee Requested to DCP Sir for time extension till 31st-Aug-20 also committed to DCP sir to clear all pending dues and Vacate Flat by 31st-Aug-20.

    Although after that also Lessee (tenant) not cleared dues and not vacated Flat as per commitment till 31st Aug-20, and further requested for time extention till 9th-Sep-2020 , again till 12th Sep20 and again time extention till 18th sep20 after call to Lessor on verbally, lessee again committing to clear all dues by 17th-Sep-20 and Vacate Flats by 18th-Sep-2020.

    Kindly suggest an action if not clearing again on 17-th and 18th Sep20.

    Requesting support for Clearing all pending payment and Vacate the Flat by 18th Sep2020 without any further extension.

    Thanking you & seek your Guidance and closure of the said issue.

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