2022 Supreme(Del) 1974

IN THE HIGH COURT OF DELHI
Amit Bansal, J.
Mehra Jewel Palace Pvt. Ltd. - Appellant
Versus
Miniso Life Style Pvt. Ltd. - Respondent
CS(COMM) 376 of 2020 & I.A. No. 8044 of 2020 (u of O-XVA CPC), I.A. No. 12139 of 2020 (for modification), I.A. No. 12216 of 2021 (u of O-XXXVIII R-1 & 5 CPC), I.A. No. 14659 of 2021 (for directions), I.A. No. 182 of 2022 (u of S 151 CPC)
Decided On : 25-05-2022

The court held that the COVID-19 pandemic constituted a force majeure event under the Lease Deed and that the defendants were entitled to the benefit of the force majeure clause insofar as payment of rent for the months of April and May 2020 was concerned. However, the court also held that the force majeure clause could not inure to the sole benefit of the lessee alone and that both the plaintiff and the defendants should equally bear the impact of the COVID-19 pandemic.

Headnote:

FORCE MAJEURE - LEASE DEED - COVID-19 PANDEMIC - RENT WAIVER - INTERPRETATION OF FORCE MAJEURE CLAUSE - SECTION 32 OF THE INDIAN CONTRACT ACT, 1872 - SECTION 56 OF THE INDIAN CONTRACT ACT, 1872 - SUMMARY JUDGMENT - INTEREST - GST - PENALTY - SET OFF.

Fact of the Case:

Plaintiff, the owner of the property, entered into a tripartite Lease Deed with defendant no.1 and Keikaku India Private Limited for running a commercial business in the demised premises. Keikaku India Private Limited withdrew from the Lease Deed and defendant no.2 was appointed as a new franchisee. Due to the COVID-19 pandemic, defendant no.1 sent an email to the plaintiff informing of the closure of the demised premises and requested a waiver of rent. Plaintiff offered a pre-approved payment plan for the rent of April and May 2020, which was not adhered to by the defendants. Plaintiff sent a legal notice calling upon defendant no.1 to make payment of outstanding rent, failing which the lease would be terminated. Defendant no.1 denied liability towards payment of rent, raising the ground of force majeure. Plaintiff filed a suit seeking recovery of possession, arrears of rent, mesne profits and interest in respect of the demised premises.

Finding of the Court:

The court held that the COVID-19 pandemic constituted a force majeure event under Clause 12 of the Lease Deed, as it was an "Act of God" and an "Embargo". The court found that the defendants were entitled to the benefit of the force majeure clause insofar as payment of rent for the months of April and May 2020 was concerned. However, the court held that the force majeure clause could not inure to the sole benefit of the lessee alone and that both the plaintiff and the defendants should equally bear the impact of the COVID-19 pandemic. The court directed the defendants to pay 50% of the lease rentals for the months of April and May 2020. The court also held that the defendants were liable to pay the lease rentals as per the Lease Deed from 1st June 2020 till 14th December 2020, when the possession of the demised premises was handed over, along with interest at the rate of 18% per annum. The court further held that the defendants were liable to pay arrears of GST on the lease rentals along with interest and any penalty or fine imposed by the GST authorities. The court also held that the defendants were liable to pay the unpaid electricity and water charges. The court allowed the defendants to claim set off in respect of the security deposit, the amount released in favor of the plaintiff, and the amount paid by the defendants in furtherance of the pre-approved payment plan.

Issues: 1. Whether the COVID-19 pandemic constituted a force majeure event under the Lease Deed? 2. Whether the defendants were entitled to a waiver of rent for the period of the COVID-19 pandemic? 3. Whether the plaintiff was entitled to recover possession of the demised premises? 4. Whether the defendants were liable to pay arrears of rent, mesne profits and interest? 5. Whether the defendants were liable to pay GST, penalty and fine on the lease rentals?

Ratio Decidendi: 1. The court held that the COVID-19 pandemic constituted a force majeure event under Clause 12 of the Lease Deed, as it was an "Act of God" and an "Embargo". 2. The court found that the defendants were entitled to the benefit of the force majeure clause insofar as payment of rent for the months of April and May 2020 was concerned. 3. The court held that the force majeure clause could not inure to the sole benefit of the lessee alone and that both the plaintiff and the defendants should equally bear the impact of the COVID-19 pandemic. 4. The court directed the defendants to pay 50% of the lease rentals for the months of April and May 2020. 5. The court held that the defendants were liable to pay the lease rentals as per the Lease Deed from 1st June 2020 till 14th December 2020, when the possession of the demised premises was handed over, along with interest at the rate of 18% per annum. 6. The court further held that the defendants were liable to pay arrears of GST on the lease rentals along with interest and any penalty or fine imposed by the GST authorities. 7. The court also held that the defendants were liable to pay the unpaid electricity and water charges.

Final Decision: The court decreed the suit in favor of the plaintiff and directed the defendants to pay the outstanding rent, mesne profits, interest, GST, penalty, fine, electricity charges and water charges, subject to set off of the security deposit, the amount released in favor of the plaintiff, and the amount paid by the defendants in furtherance of the pre-approved payment plan.