Introduction

Presently, the world is witnessing an unprecedented situation of COVID-19 which has shown its impact on all sectors including Social, Legal and Economical. Exercising the Powers under Section 10(2)(I) of the Disaster Management Act, the National executive Committee imposed a complete lockdown in the country since March 2020. This Lockdown has severely affected every individual from tips to toes. Daily wage earners and Private Earning individuals have been one of the most affected categories during this period. India has witnessed a mass movement of Migrant laborers. On asking it was found that this movement was due to lack of job and daily income which was ultimately because of the imposition of the Lockdown. In the same loop are the Tenants who had to pay a monthly rent to the Landlords but were unable to do so due to temporary suspension of their income sources. Several Petitions were filed expressing this concern before the Honorable courts, some failed and some came out with certain fruits.

Tenant & Landlord

The Relationship of ant tenant or a Landlord is contractual basis in which free will of the parties are involved. Although, in certain situations where the monthly rent is below a specified amount there this relation is governed by the various provisions of the Rent Control Acts enacted by different states. The general relation of the landlord /lessor and the tenant/lessee is governed by the mutual assurance given by both to each other which on paper is known as Rent Agreement. This Rent agreement is majorly governed by the provisions of Indian Contract Act, 1872 specially Offer, Acceptance, Breach and Frustration of Contract. The Parties can include and agree on all the present and foreseeable conditions, exceptions, etc which can give the parties the right to perform or not to perform.

Force Majeure

Black’s Law Dictionary defines Force Majeure as ‘an event or effect that can be neither anticipated nor controlled. It is a contractual provision allocating the risk of loss if performance becomes impossible, especially as a result of an event that the parties could not have anticipated or controlled’.[1] Some traces of Force Majeure can be found under Section 32 of the Indian Contract Act, 1872. A clause of Force Majeure gives out some events or circumstances which can be considered to be a Force Majeure Event. For the Clause of Force Majeure to be applicable the event must be beyond the control of the parties and the parties are required to show that they have made efforts to mitigate the Force Majeure Impact. A Clause of Force Majeure in a Contract includes an Exhaustive List of numerous events such as Acts of God, Terrorism, Acts of Government, Epidemics, etc or a Non-Exhaustive List where the parties can narrate what generally constitute Force Majeure Events and thus add ‘and such other acts or events that are beyond the control of parties’.[2] If the Party has not mentioned the Force Majeure Clause, then the Party can go for Section 56 of the Indian Contract Act which deals with the agreement to do an impossible act for the discharge of the parties from their Contractual Obligations.

Present Legal Status of Tenants under Indian Law

The Government in the United Kingdom has passed the Coronavirus Act 2020[3] w.e.f. 20th March 2020 with regard to the plight of the tenants with the aim of protecting the interest of the tenants and thus suspended the right of the landlord’s to evict business tenancies in England and Wales till the normal is restored.[4]

In India, the Ministry of Home Affairs (MHA) through the order on 29th March 2020 has inter alia directed that the landlords of rented accommodation to not to ask for rents for a period of one month from the Workers which includes the Migrants. The order also directed that landlord are not suppose to force the students and laborers to vacate their premises and any such violation would lead to criminal action on them including but not limited to the Disaster Management Act.[5]

Apart from the above guidelines, there are Laws which are present to provide protection to the tenants in such situations.

·        Section 56 of the Indian Contract Act- “Contract to do an act which after the contract is made become impossible becomes void when the act becomes impossible”.

·        Section 108(e) of the Transfer of Property Act- “If by fire, tempest, or flood or violence of any army or of a mob or other irresistible force any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purpose for which it was let, the lease shall, at the option of the lessee, be void, etc.”

In the case of Mahadeo Prosad Shaw v. Calcutta Dyeing and Cleaning Co[6], An argument that the question of a lease by destruction of the property is to be decided under the Transfer of Property Act, but the other cases of the lease becoming impossible such lockdown are to be adjudged under the Contract Act seems rather difficult.[7] The reason is while dealing with the provisions of the Transfer of Property Act and the Contract Act, the Supreme Court held in Kidar Lall Seal and And v. Hari Lall Seal[8].

Thus, According to Section 108(B) (e) of the Transfer of Property Act, a contract of lease may be avoided at the option of the lessee on the happening of the event. The lessee can exercise the rights due to circumstances beyond anyone’s control.

The Tussle between Tenant & Landlord

Various PIL’s were filed before the Supreme Court and High Court in order to seek exemotion from the payment of rent during the lockdown. The fact cannot be overlooked that in most of the areas, majority of the tenants belong to the lower class of the society and were working in some of the unorganized sectors. Many of these tenants were living on the basis of oral agreements for paying monthly rents and are unaware as well as deprived of various protections of laws. In case of Commercial leases related to shops, office, malls, etc, the tenants are not clear that whether they can take the Protection of Force Majeure Clause to avoid the rent during this lockdown. This confusion is created due to the lack of a clear and authoritative judicial precedent. Even if the lockdown gets lifted it would be difficult enough to pay the rents immediately as the re-running of businesses would take time. Let’s give a look on the recent Judicial development in this matter.

In the recent case of Standard Retail Pvt. Ltd. v. G.S. Global Corp.[9], the Bombay High Court has denied to accept the contention that the pandemic of COVID-19 and the Lockdown declared by the Central and the State Government would either tantamount to frustration, impossibility and impracticability of the contract or the same can be termed as Force Majeure Clause.[10] Thus, in this case the court declined to restrain the Respondent from encashing the Letter of Credit opining inter alia that Steel production comes within the Essential Commodities and there was no restriction on the movement of Essential Commodities.[11]

Contrary to the above mentioned judgment, the Delhi High Court in the case of Halliburton offshore Services Inc. v. Vedanta Limited[12], stated that the country wide lockdown imposed from 24th March 2020, prima facie in the nature of Force Majeure and thus granted an ad interim stay on invocation and encashment of the bank guarantees.

When we are discussing about the tenants, we must also not overlook the Landlords. None of us are aware that uptil how long is this pandemic going to last. In this situation, this fact can also not be denied that for majority of the landlords, the source of income is these rents from the tenants and hence their income must also not be blocked.

In this regard, a very relevant recent judgment of the Delhi High Court in the case of Ramanand v. Dr. Girish Soni[13], held that in Relation to the Landlord-Tenant Dispute governed by the Rent Control Act, that the suspension of Rent payment by the tenants cannot be justified, although some relaxation can be given in the schedule of the payment. Further the court in this case said in Para 26 that- 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 as held by the Supreme Court in Surendra Nath Bibran v. Stephen Court[14], also the entire contract between the Tenant and landlord must be viewed before deciding whether the rent is to be paid or not.

Conclusion

Looking by the prospective of a third party, it is difficult to say that whether the Tenants should be asked to pay the rent during this lockdown or not. As rightly stated, that this lockdown is not only for the Tenants but for the Landlords too. Although, the Delhi High Court in the Ramanand Case has came to a win-win solution to give relaxation in the schedule of the payment. Further the only solution in this severe condition would be for both the parties to sit and decide rather than rushing to the courts or playing a blame game to each other. At the end an amicable solution is the best.

The author of the post, Ms. Daisy Pallawi, Research Assistant, MyLawman. She can be reached at daisypallawi2508[at]gmail[dot]com. 

[1] Poorvi Sanjanwala and Kashmira Bakliwal, ‘What is Force Majeure? The Legal Term Everyone should know during Covid-19 crisis’  Economic Times, (May 21, 2020), https://economictimes.indiatimes.com/small-biz/legal/what-is-force-majeure-the-legal-term-everyone-should-know-during-covid-19-crisis/articleshow/75152196.cms?from=mdr

[2] Poorvi Sanjanwala and Kashmira Bakliwal, ‘What is Force Majeure? The Legal Term Everyone should know during Covid-19 crisis’  Economic Times, (May 21, 2020), https://economictimes.indiatimes.com/small-biz/legal/what-is-force-majeure-the-legal-term-everyone-should-know-during-covid-19-crisis/articleshow/75152196.cms?from=mdr

[3] Available at http://www.legislation.gov.uk/ukpga/2020/7/contents/enacted, last visited on 1st May, 2020

[4] Ananth Kini, ‘Interplay of COVID-19 and Landlord-Tenant dispute-An unending Saga’  SCC Online, (June 20, 2020) https://www.scconline.com/blog/post/2020/06/20/interplay-of-covid-19-and-landlord-tenant-dispute-an-unending-saga/

[5] Ananth Kini, ‘Interplay of COVID-19 and Landlord-Tenant dispute-An unending Saga’  SCC Online, (June 20, 2020) https://www.scconline.com/blog/post/2020/06/20/interplay-of-covid-19-and-landlord-tenant-dispute-an-unending-saga/

[6]

[10] Ananth Kini, ‘Interplay of COVID-19 and Landlord-Tenant dispute-An unending Saga’  SCC Online, (June 20, 2020) https://www.scconline.com/blog/post/2020/06/20/interplay-of-covid-19-and-landlord-tenant-dispute-an-unending-saga/

[11] Ananth Kini, ‘Interplay of COVID-19 and Landlord-Tenant dispute-An unending Saga’  SCC Online, (June 20, 2020) https://www.scconline.com/blog/post/2020/06/20/interplay-of-covid-19-and-landlord-tenant-dispute-an-unending-saga/