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by Admin
17 December 2025 7:00 AM
“COVID-19 pandemic qualifies as Act of God, but does not automatically entitle lessee to rent waiver” — Division Bench of the Delhi High Court, comprising Justice V. Kameswar Rao and Justice Saurabh Banerjee, rendered a significant judgment that revisited the interpretation of force majeure clauses in commercial lease deeds amid the COVID-19 pandemic. The Court held that although the pandemic constituted a force majeure event under Clause 12 of the lease, the lessee was not entitled to a blanket waiver of rent and was liable to pay rent partially during the period of lockdown and fully thereafter. It also refused to allow claims for penal rent or liquidated damages in the absence of proof of actual loss, despite the presence of contractually stipulated clauses providing for such penalties.
The Court’s nuanced approach laid down a crucial precedent on the enforceability of lease obligations during emergencies and on the limited scope of the force majeure defence, especially in the absence of specific contract language allowing rent waivers.
“Use of ‘etc.’ in Force Majeure Clause Makes It Illustrative, Not Exhaustive” — Court Upholds Pandemic as Valid Trigger
Clause 12 of the lease deed between Mehra Jewellers and Miniso provided for postponement of obligations in case of "Acts of God, flood, earthquake, tempest, war, riots, embargoes etc.” The lessor argued that this list was exhaustive and did not cover pandemics, especially since “COVID-19” was not explicitly mentioned. The Court rejected this contention and held:
“The use of the word ‘etc.’ in Clause 12 makes it clear that the said force majeure conditions are illustrative and not exhaustive.”
The Court drew on Black’s Law Dictionary and previous rulings to note:
“COVID-19 pandemic was an event that could not have been anticipated or controlled. The onset was sudden and affected human life unlike any other event in recent memory.”
Further, the Court accepted that the Delhi Disaster Management Authority’s restrictions and government-mandated lockdown amounted to an “embargo”, thereby fulfilling the conditions of Clause 12. The Court concluded:
“Therefore, in my view, the COVID-19 pandemic, to the extent that it resulted in the closure of the demised premises, would constitute a force majeure event in terms of Clause 12 of the Lease Deed, as the same would be covered under the expression ‘Act of God’ as well as ‘Embargo’.”
“Pandemic is Not a License to Evade Rent: Lessee Must Bear Part of the Burden” — No Full Waiver Granted
While affirming that force majeure applied, the Court was unequivocal that it did not absolve the lessee of all obligations. The lessee had paid only a partial amount and refused to make further payments, arguing that rent was not payable at all for April and May 2020 due to government-imposed lockdown.
The Court disagreed and carved out a middle path:
“Since both the parties have incurred some losses as a result of the pandemic, they shall both equally absorb the impact.”
Accordingly, it upheld the Single Judge’s decision to direct the lessee to pay 50% of the rent for April and May 2020, and full rent from June 2020 onwards until possession was returned in December 2020.
“Liquidated Damages Cannot Be Enforced Without Proof of Loss” — Penal Rent and Additional 6-Month Rent Denied
Despite Clauses 14.2 and 7.2 of the lease allowing the lessor to recover six months’ rent as penalty for breach and double rent for unauthorized occupation, the Court denied both claims. Referring to Fateh Chand v. Bal Kishan Das (1964) and Kailash Nath Associates (2015), the Bench held:
“Even if it is assumed that the defendants are guilty of breach of contract, the amounts under Clauses 7.2 and 14.2 can only be claimed if the plaintiff has suffered any loss on account of the said breach.”
The Court emphasized the requirement of actual damage or loss as a sine qua non for claiming contractual penalties under Section 74 of the Indian Contract Act, 1872, stating:
“The plaintiff has not even claimed in the plaint that it has suffered a loss on account of the defendants not vacating the demised premises… Therefore… the plaintiff would not be entitled to claim double the amount of monthly rent in terms of Clause 7.2 or additional six months’ rent in terms of Clause 14.2.”
“Amendment to Specific Relief Act Does Not Apply Retrospectively” — Court Protects Pre-Amendment Lease from New Regime
The appellant invoked the 2018 amendment to Section 10 of the Specific Relief Act, which removed court discretion and made specific performance of contracts mandatory. The lessor argued that since the lease contained clear penal provisions, the Court was obliged to enforce them, regardless of actual loss.
The Court rejected this contention, noting that the lease deed was executed on 4.01.2018, before the amendment came into force on 1.10.2018. It held:
“It cannot be said that the amended Section 10 of the Specific Relief Act, 1963 will be applicable to the facts of this case.”
Citing the Supreme Court’s ruling in Katta Sujatha Reddy v. Siddamsetty Infra Projects Ltd., the Court clarified:
“The amendment to Section 10 is prospective in nature.”
Therefore, discretion remained vested in the Court to examine reasonableness and not merely enforce contractually stipulated sums blindly.
“Specific Performance or Contractual Damages Require Proof of Harm” — Delhi High Court Reinforces Doctrine of Reasonableness
The ruling ultimately reaffirms the core principles of contract law: Force majeure suspends obligations but does not erase them, and penal or liquidated damages clauses cannot override the statutory requirement of proof of actual loss or damage.
While the pandemic's exceptional circumstances were recognized, the Court carefully ensured that it did not result in unjust enrichment or penalize a party disproportionately. It held that contractual rights are subject to overarching principles of equity and statutory interpretation, especially under Sections 73 and 74 of the Indian Contract Act.
Date of Decision: 22nd September 2025
