The disruption that Covid-19 has brought about is for everyone to see. Businesses across all sectors have been severely impacted due to the several versions on lockdown orders issued by the central and state governments from time to time.

Given that all enterprises continue to scamper to preserve cash and reduce costs, one of the major payouts that all businesses are actively trying to avoid or minimize exposure to is rental payouts. Two of the most obvious questions in this regard have been:

  1. invocation of force majeure in rental contracts; and
  2. in the absence of a pre-agreed contractual provisions, can the tenants suspend their obligation to pay rent during this lockdown period.

The discussions on the first question have been many at large and as recent as May 21, 2020 when the Delhi High Court in the case of Ramanand & Others vs. Dr. Girish Soni and Another [RC REV 447 of 2017] inter alia ruled that force majeure should be interpreted strictly based on the terms of the contract. The Court also said that the doctrine of frustration as understood under the law of contracts is alien to the rules that govern transfers of immovable property. Therefore, this post is limited to exploring the second question i.e. on the doctrine of suspension of rent and how Indian Courts have dealt with the subject, as this is the relief that most renters seek in the current circumstances.

The doctrine of suspension of rent is a principle that has evolved from common law as administered by English Courts which permits a tenant to suspend payment of rents to the landlord under certain circumstances. We examine (in brief) the judicial position on the applicability of the doctrine in India and its relevance in the present circumstances surrounding business uncertainty that Covid-19 has brought to the fore.

Judicial Position

The doctrine of suspension of rent was first discussed in the Privy Council case of Katyayani Debi v. Udoy Kumar Das [AIR 1925 PC 97]. In this case, the Privy Council held that the doctrine was applicable when the tenant was not put in possession of part of the premises leased. The doctrine was later discussed by the High Court of Calcutta in Nilkantha Pati v. Kshitish Chandra Satpati and Others [AIR 1951 Cal 338]. In this case, the Calcutta High Court held that where the landlord acts are tortuous in nature, it is for the Court to consider whether the rule of equity for total suspension of rent should or should not be applied. This was later discussed by the High Court of Punjab in the case of Hakim Sardar Bahadur v. Tej Prakash Singh [AIR 1952 Punjab 385] that where the landlord tortuously deprives a tenant of the use of a part of the leased premises, so long as the deprivation continues, the landlord cannot even claim the rent for the rest of the premises which the tenant still continues to occupy. The Punjab High Court further highlighted that the tenant, in such a case, is entitled to withhold entire rent amount for the leased premises so long as he is deprived of a part of the leased premises and he cannot be compelled to pay the rent for the portion of the leased premises still in his occupation.

Evolution of the Doctrine

While the position was that a tenant need not pay the whole rent if the landlord partially denies a tenant a portion of the leased premises, the Hon’ble Supreme Court of India in Surendar Nath Bibra v. Stephen Court Ltd. [(1966) 3 SCR 458] modified the application of this doctrine to include proportionate payment of rent. In this case, the Supreme Court held that the applicability of the doctrine of suspension of rent will depend upon the circumstances of each case, and that a factual examination is necessary to determine whether a tenant would be entitled to suspend payment of rent. It was also held that a tenant may be liable to pay proportionate rent if he has access to substantial part of the premises. The Supreme Court further observed that it is unfair if a tenant is not given possession or the right to use a substantial portion of the property and is also asked to pay compensation for the same.

It was later that the Calcutta High Court in the case of PK Roy v. Bimala Mukherjee [(1976) ILR 2 Cal 306] summarised the parameters to be considered while applying this doctrine of suspension of rent. The principles/guidelines laid down by the Calcutta High Court were as follows:

  1. In cases of eviction of the tenant from the demised property, the tenant will be entitled to suspension or partial abatement of rent.
  2. To constitute such eviction, it is not necessary that there must be physical dispossession of the tenant from the property or any part thereof. Any act or interference with the tenant’s enjoyment or possession of the property or any part thereof by any deliberate and tortuous act of the landlord or his agent will constitute eviction for application of the doctrine of suspension of rent.
  3. Such interference in the tenant’s enjoyment of the property ought to be of a grave and substantial nature.
  4. It will depend in the circumstances of each case whether there should be a suspension of rent or partial abatement of rent.
  5. It is open to the tenant to claim suspension or proportionate abatement of rent in an action against him by the landlord and the remedy is not confined only to action for damages by the tenant against his landlord.

The Calcutta High Court also highlighted that actions of landlords denying the tenants the use of electricity in the property will also amount to a deliberate and tortuous act resulting in substantial interference in the enjoyment of the tenanted premises.

There have been various cases thereafter, where the courts have applied the doctrine, but the circumstances of its applicability have largely been restricted to scenarios when the landlord/lessor had voluntarily interfered with the possession of the tenant and where due process of law has not been followed. In this regard, it will be relevant to mention the case of Ramendra Nath Ganguly vs. Ashutosh Saha and Others, 1976(1)C LJ164, where the Calcutta High Court held that padlocking of the disputed shop room due to a court order (which is by the operation of process of law) which was set in motion because of the deliberate non-payment of rent by the tenants, the landlords can neither be held responsible or made to suffer and the doctrine of suspension of rent will not come to the aid of the tenants in such an instance.

However, the question of disruption in tenancy rights due to a circumstance not directly attributable to the landlord was discussed in the case of Budge Budge Co Ltd. v. Jute Corporation of India Limited, [2001 (2) RC R (Rent) 485] before the Calcutta High Court. In that case, tenants were unable to access the leased property and there was substantial interference with the free movement of tenants due to a lock-out initiated by the employees of the landlord. The Calcutta High Court, in terms of the lease deed between the parties, was pleased to hold that the tenant is entitled to suspension of rent. However, and more importantly, the Calcutta High Court in that case appeared to have expanded the scope of the applicability of the doctrine by stating “From the discussions made hereinabove and in view of the principles laid down by the various decisions as noted herein earlier, we are, therefore, of the view that it cannot be held that only in case of dispossession of a tenant from a portion of his tenancy by the landlord by physical force, such tenant only can take advantage of suspension of rent.

What to expect going forward

An examination of the judicial decisions discussed above would suggest that the doctrine of suspension of rent applies only to cases where there is a deliberate and tortious act of the landlord which has caused the dispossession of the tenant. The Delhi High Court in the case of Ramanand and Others vs. Dr.  Girish Soni and Another too refused to apply the doctrine of suspension of rent on equitable grounds since the tenant was inter alia, in possession of a premises at a much lower rental rate compared to the actual market rate. However, the observations made by the Supreme Court in Raichurmatham Prabhakar and Others vs. Rawatmal Dugar, [AIR 2004 SC 3625] seem to suggest that the cases for suspension of rent can be encouraged when it is a question of justice, equity and good conscience. Furthermore, the conclusion arrived at by the Calcutta Hight Court in the case of Budge Budge Co Ltd. that the applicability of the doctrine of suspension of rent is not limited to instances where the tenant is dispossessed of the leased premises. It would also imply that Courts are likely to consider the facts and circumstances on a cases by case basis while applying the equitable common law doctrine of rent suspension.

The further evolution of jurisprudence around this common law principle and how Courts may interpret and apply the doctrine considering the current lockdowns and business interruptions in the wake of Covid-19 is something we will need to look out for going forward.

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Photo of Namrata Kolar Namrata Kolar

Partner in the Real Estate and Disputes Resolution practice at the Bangalore office of Cyril Amarchand Mangaldas. Namrata has advised several Indian and overseas clients in both real estate transactions and has represented them in dispute resolution matters. She has expertise in practice…

Partner in the Real Estate and Disputes Resolution practice at the Bangalore office of Cyril Amarchand Mangaldas. Namrata has advised several Indian and overseas clients in both real estate transactions and has represented them in dispute resolution matters. She has expertise in practice of debt recovery, mergers and amalgamations and property/corporate / commercial litigations and real estate development and establishment of corporate campuses. She also advises on general corporate law including on joint venture, shareholders issues, mergers and acquisitions and arbitrations. She can be reached at namrata.kolar@cyrilshroff.com.

Photo of Mridul Kumbalath Mridul Kumbalath

Partner in the Real Estate Team at the Bengaluru office of Cyril Amarchand Mangaldas. Mridul advises developers, lenders, large corporates and investors on their legal requirements surrounding real property including acquisitions, land development, leasing, security creation, regulations around special economic zones, restrictions surrounding…

Partner in the Real Estate Team at the Bengaluru office of Cyril Amarchand Mangaldas. Mridul advises developers, lenders, large corporates and investors on their legal requirements surrounding real property including acquisitions, land development, leasing, security creation, regulations around special economic zones, restrictions surrounding holding and acquisition of agricultural lands etc. He can be reached at mridul.kumbalath@cyrilshroff.com

Photo of Sharan Kukreja Sharan Kukreja

Principal Associate in the Dispute Resolution practice at the Bangalore office of Cyril Amarchand Mangaldas. Sharan has extensively advised and represented clients before courts/tribunals on litigations and arbitrations involving commercial and transactional issues. He can be reached at sharan.kukreja@cyrilshroff.com.

Photo of Sindhu Rao Sindhu Rao

Associate in the Dispute Resolution practice at the Bangalore office of Cyril Amarchand Mangaldas. Sindhu has extensively advised and represented clients before courts/tribunals on litigations and arbitrations involving civil and commercial issues. She can be reached at sindhu.rao@cyrilshroff.com.

Photo of TantuVardhn S TantuVardhn S

Associate in the Dispute Resolution Practice at the Bengaluru office of Cyril Amarchand Mangaldas. He can be reached at tantuvardhn.s@cyrilshroff.com.