Housing is one of the quintessential requirements of a human being. The dogma of adequate housing is also a very well renowned one and finds place as part of the right to standard of living in the Universal Declaration of Human Rights, 1948 as well as in the International Covenant on Economic, Social and Cultural Rights, 1966. In the landmark case of Olga Tellis v. Bombay Municipal Corporation, the Hon’ble Supreme Court elaborated on the right to adequate housing, shelter and livelihood being part of the all-encompassing Right to Life under Article 21 of the Indian Constitution. The moot question arises is when a person cannot afford to build a house he has to resort to other options for his housing, one of that is to take it on rent and this concept is known as, ‘Contract of Letting’ wherein the Landlord lets the house to another and allows him to use it for a specific period, in lieu of a certain amount, which is known as, ‘rent’ and are governed by the rent/tenancy/lease agreement. According to the United Nations Human Settlements Programme, nearly 2 million tenants in the world are under duress evicted, rather dispossessed every year, while millions are endangered and threatened with strained evictions. Security of tenure which is the cornerstone of the right to adequate housing, can take a variety of forms, including rental accommodation and as such, it is not restricted to the bestowal of ceremonial permissible title. In the Social and Economic Rights Action Center and the Center for Economic and Social Rights v. Nigeria, the African Commission on Human and Peoples’ Rights found that even though the right to adequate housing was not explicitly recognized in the Charter, it could be inferred from other rights.
Moving further, it is to be understood that the tenancy agreements in India is governed by the Rent control laws which is within the legislative competence of the states which have absolute power to enact rent control laws having exclusive territorial jurisdiction. In country like India, every state has its own mechanism of rent control laws and evolution of this can be traced when first rent control act was enacted in 1918 immediately after the First World War. The acts were enacted to provide relief to the tenants against the demand of excessive rent and indiscriminate, inhumane and arbitrary eviction by the landlords. Impractical & insufficient provisions contained which could not sustain the pragmatic circumstances led to catena of amendments and postindependence almost every state had adopted its own rent control legislations. The preamble of the legislation is primarily to prevent unreasonable eviction and also to control rent but staring at the present scenario owing to the outbreak of the COVID-19 pandemic and subsequent lockdown which has led to the pity of the tenants, the fact which dawns upon the mind is whether the law needs a throwback or requires to be amended to adduce the humanity angle and looked upon through the angle of the Indian Contract Act, 1872.
The relationship of tenant and landlord is based on an agreement and which is governed by rent laws. Normally, at the time of execution, the contracting parties often settle on the terms and conditions such as monthly rent, security deposit, duration & termination of the agreement to be followed but sometimes performance of the said contract are prevented or affected due to certain unforeseen and erratic circumstances which are beyond the reasonable and judicious control of the parties. Presently, the whole world is facing pandemic outbreak of COVID-19 and resultantly, the Government of India proclaimed lockdown across the nation vide its order dated 24th March of 2020, while exercising its powers under section 10(2) (I) of the National Disaster Management Act, 2005. In light of the said order, regular activities have been at a standstill apart from termination/suspension of various contracts including tenancy agreements.
Lockdown has though played a major role in containing the disease and refraining it from contaminating the millions of persons but have had a gigantic impact on the income sources of countless individuals, industries, business entities as well as the sudden losses of jobs and incomes due to which many households, business owners, micro, small & medium business entities have plummeted and ipso facto are unable to continue paying their rent payments leading to failure to pay rent consequently attracts eviction proceedings. In the present circumstances, it is crucial to find the answer to a question for avoiding plethora of doubts which are answered below: 1. Whether non-payment of rent can be benefited under the provision of Force Majeure Clause?
As defined in Cambridge Business English Dictionary, «Force Majeure» means, ‘an unexpected event such as a war, crime, or an earthquake’ which prevents someone from acting in consonance with the terms and conditions stipulated in the agreement. Hence, where reference is made to force majeure, the intention is to save the performing party from consequences of anything over which he has no control. A force majeure clause should be construed in each case with a close attention to the words which precede or follow it, and with due regard to the nature and general terms of the contract. The effect of the clause may vary with each instrument depending upon the facts and circumstances of each case. The relevant provision is contained in Section 32 of the Contract Act, 1872.
However, when no pertinent occurrence/happening is mentioned in a contract, the occurrence of which frustrates the very purpose of the contract, in those circumstances Section 56 of Contract Act, 1872 comes into role, which revolves around the “doctrine of frustration”. Frustration is an English contract law doctrine and is based on the Latin maxim “les non cogitad impossibilia” which means that the law will not compel a man to do what he cannot possibly perform. In common parlance, due to unforeseen circumstances, if it becomes impossible to perform any part of a contract and purpose or foundation of the contract becomes upset, in that situation, the court can grant relief under Section 56 of the Act of 1872. It has been held that ‘where performance is rendered invalid by intervention of law, or where the subject-matter assumed by the contracting parties to continue to exist is destroyed or a state of thing assumed to be the foundation of the contract fails, or does not happen, or where the performance is to be rendered personally by a person who dies or is disabled, the contract stands discharged. Thus, in a nutshell, it can be attributed that, when there is clear averment in the terms of a contract upon which the performance of the contract is dependant, such contract would be governed by Section 32 of the Contract Act, 1872 and when, there is no averment in the contract, such contracts would be governed by Section 56 of the Contract Act, 1872. Another question, which arises while discussing Force Majeure Clause, which is as follows;
2. Whether Covid-19 will be considered as a ‘force majeure’ event & will it be applicable upon tenancy agreements or not?
At the outset, it is to be understood that COVID-19 pandemic has spread across the globe and resultantly lockdown was imposed in the nation leading to closure of activities which prevented the free flow of cash flows. In India, several State Governments and the Central Government imposed travel restrictions, mandated quarantines, closed district/state borders and business operations, to restrict further outbreak. Not only this, prior to declaration of lockdown, on 19th February, 2020 the Ministry of Finance, Government of India issued a notification clarifying that “corona virus should be considered as a case of natural calamity and force majeure may be invoked, wherever considered appropriate, following the due procedure…a force majeure clause does not excuse a party’s nonperformance entirely, but only suspends it for the duration of the force majeure. The firm has to give notice of force majeure as soon as it occurs and it cannot be claimed ex-post facto…If the performance in whole or in part or any obligation under the contract is prevented or delayed by any reason of force majeure for a period exceeding ninety days, either party may at its option terminate the contract without any financial repercussion on either side”. However, it is to be understood that the aforecaptioned office memorandum is not binding document for the contracting parties, but is advisory/recommendatory in nature. Furthermore, the Ministry of Home Affairs, Government of India vide its notification dated 29th March, 2020 issued guidelines that, “wherever the workers, including the migrants, are living in rented accommodation, the landlords of those properties shall not demand payment of rent for a period of one month…if any landlord is forcing labourers and students to vacate their premises, they will be liable for action under the Act.”
The said guidelines are ambiguous & woolly in nature and seems incomplete in as much as it does not have in its kitty, issues related to commercial establishments and whether the Force Majeure Clause can be invoked in relation to tenancy agreements or not. In such circumstances, there is opacity regarding invoking of the clause by companies in its rental contracts to not pay rent for the entire period of lockdown across the country. Lockdown has affected income sources and resultantly, it has become difficult to afford regular expenses including rental payments but it is not impossible to meet the promises of rental payments and pragmatically it would be difficult to get the benefit of Force Majeure Clause.
After having meticulous deliberation over the primary issues, it is apparently clear that, in the absence of Force Majeure Clause, rationally it is not possible to avail the benefit of suspension of rent but on the other hand, if Clause of Force Majeure is available in the tenancy agreement, onus would be on the tenant/lessee for getting benefit of suspension of rent but chances for exemption are minimal. In support of the said contentions, the precedent of Hon’ble Supreme Court of India can also be referred. In Raichur Matham Prabhakar & Anr. vs. Rawatmal Dugar, it was held by the Apex Court that “So long as the lessee pays the rent reserved by the lease and performs the obligations cast on him by the contract of lease, he is entitled to hold and enjoy the property without interruption by anyone including the lessor. Under Clause (l) the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor. There has developed what is known as the doctrine of suspension of rent based on principles of justice, equity and good conscience. If the lessee is dispossessed by the lessor from the leased property, the obligation of the lessee to pay rent to the lessor is suspended.”
The aforesaid ambiguity/ query can also be clarified from the recent observation of the Hon’ble Delhi High Court in Ramanand & Ors. vs. Dr. Girish Soni & Anr., where the Hon’ble High categorically expressed that, “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 Hon’ble High Court also observed that, ‘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.’
That though the law does not aid the tenants but then the entire philosophy of pragmatic approach to be adapted by the courts are also under dark clouds in as much as if even in these extreme distress and terrible circumstances which is also termed as a pandemic by WHO and a disaster by the Ministry of Home Affairs, the court does not bend towards the needy, the entire notion of justice, equity and good conscience, fails! Arguendo, several leases do not permit tenants to withhold or suspend the payment of rent and dues, regardless of any event. In such cases, the solution can be arrived either by a mutual agreement between the contracting parties or by resorting to concept elaborated in Section 62 and 63 of the Indian Contract Act, 1872.
Concluding Remarks
There is no gainsaying that, due to outbreak of COVID-19 distinct sectors are facing inter alia novel complications, which were never even imagined. The elementary question regarding frustration of tenancy agreements has also raised but after considering pronouncements of the Apex Courts and provisions available in distinct legislations it is apparently clear that, a temporary suspension of business caused by pandemic tenancy agreement would not frustrate the contract. Though it cannot be ruled out or ignored that the pandemic and resultant lockdowns have caused tremendous financial distress and whole nation is travelling through a phase of temporary misery & economy is also at ventilator but the fact remains that the revenue losses alone cannot be the ground for non-payment of rent and also for avoiding the obligations. If the lease agreement itself does not provide for a discharge of payment obligations, it may not be possible for a tenant to refuse payment of rent. Negotiation and mutual consent is the only mode whereby; a tenant can seek waiver of rent. Another side of the story, which cannot be left abandoned, is that, during this span of economic hardships, where it is difficult for tenant to pay the rent, the lessor/landlords are also facing financial crunches.
That it would not be out of place to mention here that when starvation wreaked havoc, the British management often turned a blind eye to the melancholy of citizens, though during this hour of need Indians have once again depicted the sense of responsibility, humanity and generosity and risen to the occasion. The overwhelming and teary stories of the citizens extending assistance and nourishing the poor, with whatever resources they have or could raise gives you goose bumps and this should have touched the sense of hallowed seat of justice too.
As the nation grapple with the economic shutdown leading to halt of earnings and revenues, it could welcome a legislative amendment in the rent control law also to add a feature or a provision of exemption/ deferment from payment of rent during these pathetic times relying upon the law laid down in P G Gupta vs. State of Gujarat & Ors. wherein the Hon’ble Supreme Court held that, the right to shelter in Article 19(1)(g) read with Articles 19(1) (e) and 21 included the right to residence and settlement. Protection of life guaranteed by Article 21 encompasses within its ambit the right to shelter to enjoy the meaningful right to life. In the humble opinion of the authors, the time has come for the courts and the legislators to rethink and revamp the existing laws and philosophy by understanding that the same is related to the fundamental right of housing in order to protect the right of the tenants at least in nastiest times, like these if not forever.
Adv. Mohit Singhvi is founder and head of Singhvi & Co. Adv. Himanshu Chaudhary is Principal Associate.