SC Holds That Tenant Continues To Be Liable For Rent/Damages Even If Premises Are Destroyed

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On October 1st, a three-judge bench of SC held that a tenant continues to be liable for rent/damages even if the premises are destroyed. Moreover, a statement made before the Arbitrator cannot be permitted to be withdrawn which is predicated on a mode of calculation, the same not being disputed by the respondents and accepted by the Arbitrator as correct. 

Background

The appellants are in the business of running restaurants/eateries. In the year 1990, the appellants entered into two separate licence agreements with the respondents to operate and run a restaurant cum sweets shop at the respondents’ premises. According to the appellants, the respondents started violating the terms of the agreements after the commencement of the business and raised obstacles in the smooth running of the business. 

On account of the appellants’ non­payment of commission and failure to hand over the vacant possession of the premises to the respondents, the respondents filed a suit before the Delhi High Court under Section 20 of the Arbitration Act, 1940. An arbitrator was appointed for the same who published his award on 16.03.1998. 

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In the present appeal, the appellants had questioned the legality and correctness of the final judgment and order dated 11.02.2010 passed by the High Court of Delhi rejecting the objections of the appellants.

Appellant’s Contention 

The counsel for the appellants argued that the appellants were not liable to pay any rent. Moreover, there was no clause in the Agreement which contemplated payment of damages for the use and occupation of the premises. 

Secondly, it was argued that in the statement of accounts submitted by the appellants, certain errors had crept in inadvertently. Had these corrections been carried out, the compensation payable would have been considerably lesser.

Respondent’s Contentions 

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The counsel for the respondent submitted that the appellants have themselves filed the statement with which they are bound. The findings of fact recorded by the courts below do not call for interference in the appeal.

Court’s Observations

A three-judge bench comprising Justices N.V. Ramana, S. Abdul Nazeer and Surya Kant heard the appeal and made the following observations: 

  1. The Court concurred with the finding of the Single Judge that the appellants are liable to pay the damages. In this regard, the Single Judge referred to the case of State Bank of Patiala v. Chandermohan. It held that a tenant continues to be liable for rent/damages even if the premises are destroyed and the only option of the tenant if desirous to stop the running of rent is to surrender the premises. Thus as per the respondents own understanding of the relationship also, the respondents were liable for payment of rent.
  2. The appellants are not justified in raising a contrary plea other than what was their defence and statement of counterclaim in the arbitral proceedings.
  3. The Learned Arbitrator has rightly relied on the appellants’ statement of accounts for awarding commission for the period when the business was restarted post-closure between November 1995 and November 1997.

Court’s Decision 

No merit was found in the appeal and was accordingly dismissed. The Court concurred with the decision of the Division Bench of the High Court to reduce the rate of interest from 16% per annum to 9% per annum from the date of the award till the date of its judgment, subject to appellants paying the decretal amount to the respondents on or before 30.06.2010.


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