High Court (India)

May 22, 2020

Delhi HC declines tenants’ claim for suspension of rent during lockdown; allows relaxation in the schedule of payment


[ by Legal Era News Network ]

Delhi-High-Court

The Delhi High Court has ruled that tenants cannot invoke the Force Majeure clause to claim waiver or exemption from payment of rent owing to the lockdown while they continue to occupy the rented premises.

The Court dealt with sections 32 and 56 of the Indian Contract Act (ICA) and held:

According to the Court, 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.

The Delhi High Court also held that it is clear that Section 56 of the ICA would not apply to a lease agreement and other similarly situated contracts which are ‘executed contracts’ and not ‘executory contracts’.  Further, according to the Court, “There is no rent agreement or lease deed between the parties and hence Section 32 of the ICA has no applicability. Section 56 of the ICA does not apply to tenancies.”

The Court then considered the doctrine of force majeure as recognised in Section 108(B)(e) of the Transfer of Property Act (TPA) and held “A perusal of the above shows that the provision itself would apply only in the absence of a contractual stipulation.”

The Court observed, “In relation to some contracts which are not classic tenancy or lease agreements, where the premises is occupied and a monthly pre-determined amount is paid purely as ‘Rent’ or ‘Lease amount’, the manner in which pandemics, such as COVID-19, can play out would depend upon the nature of the contract. In contracts where there is a profit-sharing arrangement or an arrangement for monthly payment on the basis of sales turnover, the tenant/lessee may be entitled to seek waiver/suspension, strictly in terms of the clause. Such cases would purely be governed by the terms of the contract itself, and the tenant’s claim could be that there were no sales and no profits and thus the monthly payment is not liable to be made. Thus, the entitlement of the client in such a situation is not governed by any overriding force majeure event but by the consequence of the said event, being that there were no sales or profits.”

The Court concluded this issue by holding, “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 tenants request for suspension of rent was also rejected but was allowed to be postponed owing to the lockdown. Justice Pratibha M Singh of the Delhi High Court passed the order.



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