In a significant legal ruling by the Supreme Court of India, a dispute over the refund of a security deposit has been resolved between the landlady and a bank. The judgment sheds light on the obligations regarding the refund of the deposit amount upon the bank vacating the leased premises. This landmark decision clarifies the procedures to be followed in similar property disputes. #LegalCase #SupremeCourt #PropertyDispute
Facts
- Appellant-landlady leased out commercial premises to respondent-Bank as per lease agreement dated 13 October, 2000.
- Lease agreement included clauses regarding condition of demised premises on expiry, assignment/subletting, and termination.
- Monthly rent agreed upon was ₹ 28,625/-.
- Bank terminated lease by issuing three months’ notice effective from 16 August, 2004.
- The decree passed in favor of the appellant-landlady was set aside.
- The counter claim filed by the respondent-Bank was allowed.
- The rent application filed by the appellant-landlady was decreed in her favor.
- The counter claim filed by the respondent-Bank seeking refund of the security amount with interest was rejected.
- The appeal filed by the respondent-Bank before the Appellate Rent Tribunal was allowed.
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Arguments
- The obligation to refund the security amount was contingent upon the respondent-Bank vacating the premises.
- Refund of the security deposit should have been done when the vacant possession was handed over to the landlady.
- The appellant-landlady’s counsel argued that the notice issued by the respondent-Bank referred to a later date for handing over possession than claimed.
- The Single Judge was criticized for not recognizing this fact and upholding the decision of the Appellate Rent Tribunal.
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Analysis
- Clause 6 of the Deposit Agreement stipulates the conditions for refunding the deposit to the Lessee upon the termination or expiry of the Lease Agreement.
- If the Lessor fails to refund the deposit in full, the Lessee is not obligated to vacate the premises or give charge to the Lessor, and can continue using the premises without paying rent, outgoings, or damages.
- The Lessor would be liable to pay interest at 24% p.a. if the deposit is not refunded timely, and if not returned for 30 days, the Lessee can further sublet the premises.
- No steps were taken by the respondent-Bank to call upon the appellant-landlady to be present for handing over/taking over possession of the leased premises and refunding the security deposit simultaneously.
- The impugned order dated 09 January, 2012 was not sustained as it upheld the Appellate Rent Tribunal’s order without proper procedure.
- The order dated 30 July, 2015 by the Division Bench of the High Court was maintained as intra-court appeal against an Article 227 petition was not permissible.
- The language of Clause 6 of the Deposit Agreement clearly stated the procedure for refunding the deposit amount upon the Bank vacating the leased premises, which was not followed in this case.
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Decision
- Civil Appeal No. 6097 of 2017 is dismissed as there is no error in the finding regarding maintainability of an appeal against the order dated 09 January, 2012, passed in proceedings under Article 227 of the Constitution of India.
- Civil Appeal No. 6096 of 2017 is allowed.
- The judgment dated 10 April, 2008 passed by the Rent Tribunal is restored.
- The decree passed in favour of the appellant-landlady is upheld.
- Parties are left to bear their own expenses.
Case Title: MAHENDRA KAUR ARORA Vs. HDFC BANK LTD. (2024 INSC 432)
Case Number: C.A. No.-006096-006097 – 2017
