Contractual rent liability continues despite Covid force majeure claims; security deposit cannot be unilaterally adjusted against arrears.

The Delhi HC held that a lessee in continued occupation of leased premises could not avoid contractual rent obligations merely by relying on Covid-19 force majeure claims or Disaster Management Act directions, because the rent liability arose from subsisting lease terms and was not shown to depend on revenue sharing. It also held that the security deposit had to be governed by the lease deed and could not be unilaterally adjusted against alleged arrears in interim proceedings under Section 17 of the Arbitration and Conciliation Act, 1996. The interim direction to deposit arrears and comply with related measures was upheld.

---

---

Issues: (i) Whether the appellant could avoid payment of lease rent on the basis of Covid-19 related force majeure conditions and directions issued under the Disaster Management Act, 2005. (ii) Whether the security deposit furnished under the lease deeds could be adjusted against the arrears of rent directed to be secured under Section 17 of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether the appellant could avoid payment of lease rent on the basis of Covid-19 related force majeure conditions and directions issued under the Disaster Management Act, 2005.

Analysis: The appellant remained in possession of the leased premises and continued to use them for business. The lease rent was contractual and the financial terms were not shown to depend on revenue or profit sharing. The impact of the pandemic did not, by itself, extinguish the obligation to pay rent under the subsisting lease arrangements.

Conclusion: The plea based on force majeure and the Disaster Management Act, 2005 was rejected and the rent liability was held to continue.

Issue (ii): Whether the security deposit furnished under the lease deeds could be adjusted against the arrears of rent directed to be secured under Section 17 of the Arbitration and Conciliation Act, 1996.

Analysis: The security deposit was governed by the lease agreements and had to be dealt with in accordance with those contractual terms. No basis was made out for a unilateral adjustment of the deposit against the claimed arrears in the interim proceedings.

Conclusion: The request for adjustment of the security deposit was rejected.

Final Conclusion: The interim order directing deposit of rent arrears and related compliance measures was upheld, and the appeal was dismissed.

Ratio Decidendi: A lessee in continued occupation of leased premises cannot avoid contractual rent obligations merely because business was affected by the pandemic, and security deposits must be handled according to the lease terms unless the contract permits otherwise.

---