Lease Agreements - COVID-19 pandemic considered an event of Force Majeure under lease agreement
Delhi High Court Upholds Force Majeure Clause in Lease Agreements Amidst COVID-19 Pandemic. Landmark Judgment Reinforces COVID-19 as an "Act of God," Directs Shared Financial Impact Between Lessors and Lessees.
In a pivotal judgment, the Delhi High Court, presided by Justices V. Kameswar Rao and Saurabh Banerjee, has affirmed the applicability of the force majeure clause within lease agreements due to the unforeseen COVID-19 pandemic. The judgment arose from the appeal filed by M/s Mehra Jewel Palace Pvt. Ltd against Miniso Lifestyle Pvt. Ltd, challenging the partial relief granted by the Single Judge concerning lease rental waivers during the lockdown period.
The court recognized COVID-19 as a force majeure event, citing it as an "Act of God" and an "Embargo," hence justifying the invocation of the clause for rent waiver during the months of April and May 2020, when commercial premises were mandated closed. This interpretation aligns with government-issued Office Memoranda and previous judicial precedents acknowledging the pandemic's impact as exceptional and beyond control.
The bench directed that both lessors and lessees should equally share the financial burdens brought about by the pandemic. Consequently, lessees were held liable to pay only 50% of the rent for the specified lockdown period, acknowledging the continued obligations of both parties despite operational disruptions.
Furthermore, the judgment dismissed the appellant's plea for penal rent and double rent under specific clauses of the lease deed, citing the absence of proven actual loss or damages. The court emphasized that the Specific Relief Act amendments of 2018, which removed judicial discretion in enforcing specific performance, do not apply retrospectively to agreements established prior to the amendment, hence maintaining judicial discretion in this case.
The Delhi High Court's judgment reinforces the legal interpretation of force majeure in contracts, particularly under extraordinary circumstances, and underscores the necessity of equitable relief in the face of global crises.
Bottom Line:
Lease Agreements - Interpretation of Force Majeure Clause - COVID-19 pandemic considered an event of Force Majeure under lease agreement, justifying partial waiver of rent due to the lockdown and closure of premises.
Statutory provision(s): Indian Contract Act, 1872, Specific Relief Act, 1963, Code of Civil Procedure, 1908
Mehra Jewel Palace Pvt. Ltd v. Miniso Lifestyle Pvt. Ltd, (Delhi)(DB) : Law Finder Doc Id # 2782444
