HC lays down parameters for suspension of rent payment due to COVID-19

In a significant decision, the Delhi High Court has laid down broad parameters for dealing with the issue of suspension of payment of rent by tenants owing to ‘force majeure’ conditions like the COVID-19 lockdown crisis.

Justice Prathiba M Singh, laid down the parameters, while rejecting some Khan Market tenants’ plea seeking suspension of rent payment as they were unable to use the premises due to the COVID-19 pandemic, saying they were not willing to vacate the shop despite an eviction order against them.

“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 judge said.

Laying down the parameters, Justice Singh said where there are agreements between a landlord and tenant which contain a ‘force majeure’ clause, providing for some sort of waiver or suspension of rent, only then the tenant could claim the same.

Related news: ‘Act of God’? Invoking ‘force majeure’ in the time of coronavirus

“The force majeure clause in the contract could also be a contingency under 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, the rent or the monthly charges would be payable,” the high court said.

Justice Singh said ‘force majeure’ is defined by Black’s Law Dictionary as “an event or effect that can be neither anticipated nor controlled” and according to a normal dictionary, “The term includes both acts of nature (e.g. floods and hurricanes) and acts of people (e.g. riots, strikes and wars)”.

The order said that impossibility of performance, as provided under the Contract law, “Would not apply to a lease agreement and other similarly situated contracts.”

The high court said in the absence of contracts or contractual stipulations the provisions of the Transfer of Property Act, 1882 (TPA) would govern tenancies and leases and for a lessee to seek protection under the TPA, “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, the TPA cannot be invoked, the court said and added that in the instant case, “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 the TPA. The tenant cannot also avoid payment of rent…”

The high court said that in the instant case, the Contract Act would not apply as there was no “force majeure” clause in the lease deed and TPA too would not be applicable as they were no longer lessees as there was an eviction order against them.

It said only the Delhi Rent Control Act would apply to them and in the instant case, the Khan Market tenants’ application is liable to be rejected as while seeking suspension of rent on the basis of a force majeure event, they do not intend to surrender the tenanted premises.

“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,” the court said and directed that the use and occupation charges for the month of March, 2020 shall be paid on or before May 30 2020 and for the months of April, 2020 and May, 2020 by June 25, 2020.

Related news: Insurers cannot decline death claim settlement in case of COVID-19

“From June 2020 onwards, the payment shall be strictly as per the interim order dated September 25, 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 September 25, 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,” the high court said.

The September 25, 2017 interim order had come on the appeal of the tenants challenging the September 18, 2017 decision of the Rent Control Tribunal upholding the March 18, 2017 order of the Rent Controller directing them to vacate the store.

The March 18, 2017 eviction order had come on the plea of the landlord, a dentist, who had given the premises on rent back in Februrary 1975 for ₹300 via a lease deed.

Following the outbreak of COVID-19, an application for suspension of rent was moved, during the lockdown period.

In the application, the tenants had taken the stand that due to the lockdown, there has been complete disruption of all business activities, including theirs. They claimed that the circumstances are ‘force majeure’ and beyond their control and therefore, they are entitled to waiver of the monthly payment as directed in the interim order of September 25, 2017, or some partial relief.