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Introduction
Landlord-Tenant or Lessor-Lessee disputes are very common in India. One facet of this Landlord-Tenant dipsute is non payment of rent by the tenant to the landlord on one pretext or another. To escape from payment of rent unscrupulous tenants often either file a case in the court to entangle the tenanted property in perennial litigation or stop paying any rent till the landlord himself files a case and then exploit legal loopholes to keep the matter pending for decades.
But its effects can be highly adverse for the landlords. A landlord might be of old age, entirely dependent on the rent for his subsistence. Further a landlord might want to sell the house when in need of finances. Hence when the tenant does not pay rent or denies to vacate the property despite legally required to do so(of course all tenants are not the same and this group of tenants is a limited one), it impacts the financial condition of the landlord negatively. Also no one will ever purchase a property which is either possessed by the landlord as everyone knows eviction of the tenant in India is an uphill task. Example can be taken of the provisions like Section 14(6) Delhi Rent Control Act, 1958 under which even if someone purchases the property from the original owner, he cannot evict the tenant for 5 years .
In this article I will explain the remedies and ways available with the landlord to effectively deal with these kinds of situation. Further at the end of the article I will explain as to how a landlord can even during the pendency of the case can force the tenant to pay the rent till the case ends.
So let’s see what this case is all about
Brief Facts
The landlord (also called Lessor) let’s out his property at Safdarjang Development Area in Delhi(hereinafter called the “Property”) to the tenant (also called Lessee) for running a gym & spa in the name of Intense Fitness & Spa Pvt. Ltd. from the year 2016. As generally happens after sometime, more precisely from November 2018, the tenant stopped paying any rent to the landlord. Therefore the landlord instituted a case (also called a Suit) in the Delhi High Court for recovery of arrears of rent i.e. payment of rent from November 2018 onwards.
In this case the tenant raised 3 objections.
The First objection of the tenant is that though the landlord has filed a case in the ordinary manner under Civil Procedure Code, 1908 which is also called an “Ordinary Suit”, the case should have been filed as a Commercial Suit under the Commercial Courts Act, 2015. This argument is based on the belief that as the tenant is running a gym and spa and not using the Property for residential purposes, it must mean that the tenanted property is used for commercial purposes and hence an ordinary case is not maintainable.
The Second objection of the defendant is that the Property was earlier used for residential purposes, which after payment of prescribed fees & charges to the erstwhile South Delhi Municipal Corporation (as we all know SDMC, NDMC & EDMC are now combined to form a single Municipal Corporation of Delhi) was allowed to be used for commercial purposes. But during the tenancy of the lease the ATMCD (Appellate Tribunal of Municipal Corporation of Delhi) declared the tenanted property as a residential one as it is not in the market area and hence asked the tenant to stop using it for commercial purposes as otherwise the property will be sealed by erstwhile SDMC. This coupled with COVID, have caused losses to the tenant and hence due to the act of the ATMCD together with COVID epidemic, the tenant have faced losses which should be allowed to set off against the rent which is to be paid by him to the landlord. This essentially means that the net amount should be calculated by subtracting the losses from the total arrears of rent and that the tenant should be asked to pay only this net amount.
Third Contention of the defendant originates from the second contention whereby the tenant says that it is clear from second objection that the property is a residential one hence claiming a high rent of Rs. 22 Lacs per month is incorrect and lower rent should be charged from him. Hence the tenant is also raising issue with the amount of rent charged from him.
Is the Tenant Right?
Now let’s deal with these objections one by one.
The first contention of the tenant is incorrect for 2 reasons. Firstly it is the argument propounded by the tenant himself that as the tenanted property was residential he should not be asked to pay high commercial charges. By stating this, the tenant is taking 2 contradictory positions, whereby on one hand he is saying that Ordinary case is not maintainable as the tenanted property is a commercial one but at the same time he is also saying that he will not be liable to pay commercial charges as the tenanted property is residential. In the legal language it is called Approbating and Reprobating and taking two contradictory stances at the same time is not permissible in law.
Secondly under Section 2 (vii) the Commercial Court Act, 2015 defines “commercial disputes” are the ones which arise with respect to “agreements relating to immovable property used exclusively in trade or commerce”(here the immovable property is the tenanted house). It is the common case of the landlord as well as the tenant that the tenanted property was residential in the beginning, but as the tenant wanted to do commercial activity, i.e. running gym and spa, in the tenanted property it was converted into a commercial property after the payment of the user charges to the erstwhile SDMC. So, the tenanted property is of a mixed nature and not ‘exclusively’ commercial and hence the dispute relating to rent of this Property cannot be termed as a commercial dispute. Hence the tenant’s argument that a commercial case is the only remedy for adjudication of the landlord’s claim is entirely incorrect.
This begs the question as to how do we know that the property is residential or commercial? Presently Delhi’s property classification is governed by Master Plan and rules made by Municipal Corporation of Delhi. Generally, the property which is alongside a public road is earmarked as a commercial property in Master Plan and Municipal Corporation of Delhi records otherwise it is residential.
Now coming to the Second contention of the tenant, it can be seen that it is patently incorrect. Only because some loss has occurred to the tenant in running his business can be no ground for the non-payment of the rent. Risk is always present in running each and every business and the lessor/landlord cannot be disentitled from receipt of the rent only because lessee/tenant suffered some loss. This only happens in an Agreement of Partnership where profits and losses are shared by all the partners in the proportion of their shares. Surely a lessor/landlord and lessee/tenant are not partners to each other and hence lessor is not obligated to share any losses of the lessee. Let’s see from a different angle. If tomorrow the tenant’s business thrives and he makes exponential profits would the tenant give more rent to the landlord? There are no prizes for guessing the answer and hence the second contention of the tenant also fails.
(Though from my experience I would suggest that the tenant should have incorporated “Force Majeure Clause” in his Rent Agreement/Lease Deed. According to force majeure clause any party can terminate the rent agreement on the happening of a situation which is out of their control. These conditions include wars, epidemics, change in the governmental policy etc. As we know that COVID was certainly an epidemic worth calling a force majeure, the tenant obviously should have been protected from paying the rent during COVID period. But it appears that the tenant did not include this clause in the rent agreement, which came to bite him later on).
Further another act of tenant which begs an answer is that if the business of the tenant was in such dire straits why didn’t he vacate the premises in question after giving due notice to the landlord.
Now let’s finally come to the Third objection of the tenant. So far as the Third contention of the tenant is concerned there is substantial case law on the point that when parties enter into a contract, they cannot later on renege from obeying its terms. The tenant was aware about the rent of the property at the time of the execution of lease or tenancy agreement, and having agreed to the same he cannot go back on the promise of paying the agreed rent. What if based on the promise of the tenant to pay the rent, the landlord have undertaken some new obligations, like he might have taken loan for the education of his children the instalments of which he hoped to pay from the rent received from the tenant. Hence “a contract is sacrosanct and cannot be breached by a party unilaterally”.
Landlord Can Ask For Rent Even When Case Is Pending In Court
Having answered these contentions what is the remedy present before the landlord. First of all the landlord should file an application under Section 15A of the Civil Procedure Code, 1908 and Order 39 Rule 10 of Civil Procedure Code. The reason for this is civil suit takes some time for its completion and it can stretch for more than 5 to 6 years depending on the competence of your lawyer and hence the landlord should not be starved of the rent which he should have received in ordinary course. It is also immoral to make him suffer during the entire process of the litigation. Further landlord will need money for his survival. So it’s better to file an application under Section 15 A and Order 39 rule 10 of CPC, which if decided in favour of the landlord entitles the landlord to receive the rent during the pendency of the litigation as the Court directs the tenant to pay the amount into the court. For this reason that the court asked the tenant to pay Rs.17 Lacs per month to the landlord from the day it failed to do so i.e. November 2017 till the end of the case. This way it doesn’t matter how long the case goes the tenant have to pay the said amount every month to the landlord.
Conclusion
We saw as to how though in the beginning the tenant denied to pay the rent to the landlord but due to right applications filed by the Landlord’s counsel in the Court, the landlord was able to get not only the arrears of the rent @Rs.17 Lacs per month but also Rs. 17 Lacs per month till the suit ends.
So the landlords have to understand and become aware of the rights which they have in case the tenant either does not vacate the property or denies to pay the rent. The landlords are not helpless and it is their right, of course when he also obeys the lease agreement, to get the agreed rent. But it only applies to those landlords who do not shy away from enforcing their legal rights seriously and have no hesitation in resorting to the legal remedies if the lease agreement is breached.
Parveen Semwal
Advocate, High Court of Delhi and Supreme Court of India