In a recent legal battle over rental payments, the court’s detailed analysis of the force majeure clause in the lease agreement is crucial. This case explores the complexities of contractual obligations during unprecedented events like lockdowns. Understanding how the court navigates force majeure provisions provides valuable insights for both lessors and lessees in similar disputes.
Facts
- Respondent to compute arrears towards rent separately for each premises under lease at agreed rates for respective periods
- Arbitrator directed deposit of 100% of rental amount due for period between March 2020 to December 2021
- Appellant disputed liability to pay rent during lockdown invoking Force Majeure clause, but directed to deposit rental amount by Arbitral Tribunal
- High Court dismissed appellant’s appeal against Arbitral Tribunal’s order to deposit rental amount
- Respondents filed applications under Section 17 of Arbitration Act seeking deposit of rental amount for specified period
- Amounts to be deposited in Fixed Deposit accounts for respective claimants
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Arguments
- The appellant contends that the principle of force majeure in clause 29 of the lease agreement should be considered by the Arbitral Tribunal before directing payment of full rental amount.
- The appellant paid wages to employees even during the lockdown period, showing commitment to its obligations.
- The appellant argues that its inability to use the rented premises was due to circumstances beyond its control, such as the lockdown.
- An amount of Rs. 87,64,133.76/- has been paid towards rentals for specific periods.
- The appellant had also incurred other overhead expenses, TDS dues, electricity, and water charges during the relevant periods.
- The appellant believes that the force majeure clause in the lease agreement should apply to the situation.
- The appellant has made payments towards rentals during the pendency of the arbitration proceedings, indicating good faith.
- The counsel argues that the arbitration tribunal did not consider the appellant’s submissions on the force majeure clause properly.
- The appellant’s position is that the order to deposit 100% rental amount as an interim measure was not appropriate given the disputed liability during the lockdown period.
- The appellant highlights the operational restrictions and closures imposed due to the pandemic as reasons for non-payment of full rental amount during specific periods.
- Principles under Order XXXVIII Rule 5 and Order XXXIX Rule 1 are considered not applicable in the case of an interim measure.
- The direction given to the lessee to deposit the rental amount while in possession is emphasized.
- The principles of force majeure are argued to be inapplicable as the lessee remained in possession of the leased premises.
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Analysis
- The counsel for the appellant relied on previous decisions but they were deemed not applicable.
- The High Court dismissed the appeal and upheld the interim order issued by the Arbitral Tribunal under Section 17 of the Arbitration Act.
- The dispute is regarding the rental amount for the period between March, 2020 to December, 2021.
- The Arbitral Tribunal directed the appellant to deposit the rental amount for this period as an interim measure.
- The appellant claims force majeure under clause 29 of the lease agreement due to lockdown affecting business.
- The Tribunal did not give a definitive opinion on the force majeure clause at that stage.
- The liability to pay rent for the lockdown period is yet to be adjudicated by the Tribunal.
- An order for deposit as an interim measure should not have been passed when there is a serious dispute on liability.
- Complete closure due to lockdown occurred on specific dates, and rent payment exemption is applicable for those periods.
- The appellant is required to deposit the rental amount for the period excluding the days of complete closure due to lockdown.
- Directing deposit for the complete closure period is not justified until the application of force majeure under clause 29 is fully considered.
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Decision
- The Tribunal will consider the applications under Section 17 of the Arbitration Act and interim measure orders independently
- The final adjudication on liability for rental payments is separate from the interim measures
- Appellant to deposit the balance amount as per the interim order
- Deposit to be made for rental payments, excluding periods of complete lockdown
- All contentions are kept open for both parties
- Non-deposit during lockdown periods subject to final arbitration outcome
- Arbitration Tribunal to consider force majeure in accordance with law and on its own merits
- Arbitration proceedings to conclude within nine months with cooperation of both parties
Case Title: EVERGREEN LAND MARK PVT. LTD. Vs. JOHN TINSON AND COMPANY PVT. LTD. (2022 INSC 445)
Case Number: C.A. No.-002783-002783 / 2022
