On Suspension of Rent of Tenants: Analysing the Judgement of Hon’ble High Court of Delhi in Ramanand & Ors. vs Dr. Girish Soni – By Ishan Jain and Neeraj Jha

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The  suspension of rent of tenants due to COVID is a hot topic of discussion nowadays. Ever since the lockdown was ordered, tenants have been raising the demand for suspension of rent during this crises. However the demand to suspend rents of the tenants failed to take into account that there are many landlords whose sole source of income is the rent and any suspension would cause great hardship to the landlords. The demand for rent suspension, however, remains. 

Hon’ble Delhi High Court had the occasion of analysing the law w.r.t suspension of rent vis-a-vis COVID in the recent judgement dated 21.05.2020 passed in Ramanand & Ors. Vs Dr. Girish Soni & Anr being RC.REV. 447/2017. In the said case the tenant in a pending rent revision petition had moved an interim application seeking suspension of rent of Rs. 3,50,000/- per month due to closure of business activities during the lockdown thereby pleading frustration of contract as envisaged in section 56 of the Indian Contract Act, 1872. The Hon’ble High Court consequently analysed the concept of frustration of contract as envisaged under section 56 of the Indian Contract Act, 1872 and came to the conclusion that the same has no applicability to the case at hand as agreement of lease are executed contracts as different from executory  contracts inasmuch as an executory contract is a contract that has not yet been fully performed or fully executed. It is a contract in which both sides still have important performance outstanding and that the lease agreement of this nature are not executory contract rather they are executed contracts.  The concept of frustration of contract can only be applied to executory contracts. It was further held by the Hon’ble Court that frustration of contract makes the whole contract void. The necessary implication of the same is that the tenant must then surrender the possession of the premises.

The facts of the case at hand as mentioned in the judgment would show that the Hon’ble High Court has failed to examine an issue which actually arose in the case. 

The facts of the case was that revision petition was filed by the Appellants/Tenants challenging the order dated 18th March, 2017 passed by the ld. Senior Civil Judge-cum-Rent Controller granting a decree of eviction in respect of Shop No. 30-A, Khan Market, New Delhi (hereinafter, “tenanted premises”). The Tenants ran a shoe store called ‘Baluja’ in Khan Market where they sold various types of foot wear. The Landlord i.e., Respondent No.1 (hereinafter, “Landlord”) is a dentist. The tenanted premises were given on rent for commercial purposes through a lease deed executed on 1st February, 1975 at Rs.300/- per month. In 2008, the Respondents filed an eviction petition under Section 14(1)(e) of the Delhi Rent Control Act, 1958 (hereinafter, “DRC Act”). Initially, leave to defend was granted by the RC on 31st March, 2012. However, vide order dated 18th March, 2017, a decree for eviction was passed. 

The Tenants thereafter filed an appeal against the said order which was dismissed by the ld. Rent Control Tribunal (hereinafter, “RCT”) vide order dated 18th September, 2017 on the ground that the same is not maintainable. Hence, the revision petition before the Hon’ble High Court was filed challenging the eviction order dated 18th March, 2017. 

The said impugned order dated 18.03.2017 was stayed by the Hon’ble High Court vide order dated 25.09.2017 and the operative part of the order is as under:-

“….Subject to the petitioners, with effect from the month of October, 2017, paying to the respondents a sum of Rs.3.5 lakhs per month, month by month, in advance for each month by the 10th day of the English Calendar month, there shall be stay of the order of eviction.

If there is any default in payment, the stay of execution of the order of eviction shall stand vacated and the respondents shall be entitled to execute the order of eviction.”

The aforesaid would show that the contractual rate of rent was Rs. 300 per month and that the payment of rent of Rs. 3.5 lakhs per month was fixed by the Court as a condition precedent for granting stay on eviction. 

In this background, the Hon’ble High Court ought to have examined the applicability of doctrine of frustration under section 56 or applicability of section 32 of the Indian contract Act. In other words the question that should have been dealt with and decided by the Hon’ble High Court was the applicability of section 56 or section 32 vis-a-vis orders of the Courts as the rent of Rs. 3.5 lakhs per month was decided by the Court and was not contractual rate of rent. It is inconceivable that had the rent been Rs. 300 per month, the tenant would have ever filed an application seeking suspension of rent. 

The applicability of doctrine of frustration to the agreement of lease was settled long ago by Hon’ble Supreme Court in Raja Dhruv Dev Chand v. Raja Harmohinder Singh & Anr. AIR 1968 SC 1024 and the same also finds mention in the judgment of the Hon’ble High Court. The said judgement very clearly laid down that once a lease is executed the same would be governed by the provision of section TPA. The relevant portion of the said judgement is as under:-

“…Under a lease of land there is a transfer of right to enjoy that land. If any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purpose for which it was let out, because of fire, tempest, flood, violence of an army or a mob, or other irresistible force, the lease may, at the option of the lessee, be avoided. This rule is incorporated in Section 108(e) of the Transfer of Property Act and applies to leases of land, to which the Transfer of Property Act applies, and the principle thereof to agricultural leases and to leases in areas where the Transfer of Property Act is not extended. Where the property leased is not destroyed or substantially and permanently unfit, the lessee cannot avoid the lease because he does not or is unable to use the land for purposes for which it is let to him.”

The above judgment would show that the issue of applicability of doctrine of frustration or contingent contract w.r.t lease agreement was no longer res-integra and the issue that ought to have been decided by the Hon’ble High Court was the applicability of section 56 or section 32 vis-a-vis orders of the Courts ? 

The answer to the aforesaid question of law would have to be an emphatic no as there can be no contract between a litigant and Court. Once the revisionist/tenant accepted the rent fixed by the Court so as to avail the benefit of stay of eviction, then there cannot be any applicability of provisions of the Contract Act at all insofar as payment of rent of Rs. 3.5 lakhs is concerned. The  payment of rent anyhow is never dependent on the earning capacity of the tenant more so when in the present case the tenant had agreed to pay to the rent of Rs. 3.5 lakhs per month for stay on his eviction. 

In para 31 of the judgment, the Hon’ble High Court has laid down certain broad parameters to be considered for suspension of rent. It is, however, respectfully submitted that the said discussion is completely misplaced, as the factors enumerated therein are to be considered only for fixing the rent and not for suspension of rent. It’s a matter of common parlance that everyone wants to start their business from posh area/market and the cost of such place is already considered by a prudent businessman. The suspension of rent has no nexus at all with the loss or profits earned by the tenant. Further, the observations contained in para 31(iv) are also incorrect as once the Hon’ble High Court has already stayed the eviction decree then the tenants are not unauthorised occupants. 

The above discussion would show that the Hon’ble High Court thus could have cut short the whole issue by directly analysing the law w.r.t applicability of section 56 or section 32 vis-a-vis orders of the Courts and that would have settled the entire law on the subject. 

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Advocates Ishan Jain and Neeraj Jha are Partners at Suvigya Legal, a Delhi-based law firm.

Disclaimer: The views or opinions expressed are solely of the author.

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