The Covid-19 pandemic has had large-scale implications for human life and as the impact of the pandemic Covid-19 builds by the day, the consequences of the lockdown imposed by the Government has been bringing into focus the implications on the contractual obligations, especially that of lessors and lessees. The pressing concern of whether the lockdown would entitle tenants to claim waiver or exemption from payment of rent or suspension of rent, etc has been mounting every day since the lockdown. We, at Anant Merathia and Associates have been advising our clients by taking the stance that this is not a ‘one size fit all’ situation and it varies on a case-to-case basis, depending upon a valid contract, the existence of a force majeure clause in the same, the other relevant clauses in the contract agreed between parties etcetera.
The Delhi High Court pioneering the way in the midst of the Covid-19 crisis:
Addressing this important concern and paving the way forward for innumerable anxious tenants and landlords across the country, the Hon’ble High Court of Delhi has in Ramanand & Ors v. Dr. Girish Soni & Anr (RC Rev. 447/2017)vide its Order dated 21.05.2020 has laid down some broad parameters that can be kept under consideration, in order to determine the manner in which the issues that arise in respect of lease and tenancy agreements can be resolved.
In the aforementioned Order, the Hon’ble Court has acknowledged the existence of multifarious forms of relationships between the landlords & tenants, lessor & lessee, licensor & licensee etc., and stated that these relations are primarily governed either by contracts or by law. In the realm of contracts, the respective rights and obligations of the parties would be determined by the terms and conditions of the contract itself. The Hon’ble Court also held that “the question of waiver, suspension or any remission in the rental payments would operate differently for each category of agreements.”
It has been held in crystal clear terms in the instant judgment that:
In case of a contract + force majeure clause and/or any condition that could permit waiver or suspension of the agreed monthly payment à the issues would have to be governed by the contractual terms.
In case there is no contract at all or if there is no specific force majeure clause à then the issues would have to be determined on the basis of the applicable law (i.e., the S. 108(B)(e),(l) of the Transfer of Property Act, 1882, (“TPA”) in case of leases/tenancy agreements); (Section 56 of the Indian Contract Act, 1872, would apply otherwise but not in case of lease agreements).
In case of Existence of a Force Majeure Clause:
It has been held that the force majeure clauses have no standard draft, application or interpretation. Thus, if the contract contains a clause providing for some sort of waiver or suspension of rent, only then the tenant could claim the same. 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.
In case of Absence of a Force Majeure Clause:
In case of leases where there is no contract or force majeure clause, It has been reiterated that until and unless there is a complete destruction of the property, Section 108(B)(e) of the TPA cannot be invoked. Thus, it has been held in the aforesaid Order that 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 and that the tenant cannot also avoid payment of rent in view of Section 108(B)(l).
It has also been held that, in the absence of a contract or a contractual stipulation, the tenant may generally seek suspension of rent by invoking the equitable jurisdiction of the Court due to temporary non-use of the premises. But the question as to whether the suspension of rent ought to be granted or not would depend upon the facts and circumstances of each case.
Treatment in case of Non-Classic, multifarious Lease Deeds:
The Hon’ble Court has also stated that some contracts which are not classic tenancy or lease agreements, i.e., profit-sharing agreements, contracts where the rent is based on the sales turnover etc., the manner in which pandemics, such as COVID-19, can play out would depend upon the nature of the contract, as per the terms specified itself. Thus, it has been held that the entitlement of the party in such a situation is not governed by any overriding force majeure event but by the consequence of the said event specified in the contract itself, being that there were no sales or profits.
Conclusion:
After providing a ready reckoner for the ways to approach the multitude of issues pertaining to the leases, tenancy agreements in the wake of Covid-19, in the instant judgment, the Hon’ble Judge in the instant case held that as there was no contractual condition that permitted non-payment or suspension of rent for the tenant and rejected the tenant’s application for suspension of rent. However, the Court also held that some postponement or relaxation in the schedule of payment can be granted owing to the lockdown, thus providing a breather for the tenant too.