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What Are The Consequences Of The LandLord's Refusal/Failure To Take The Possession Offered By The Tenant?

NIRAJ Singh
15 July 2020 6:47 AM GMT
What Are The Consequences Of The LandLord

Pandemic COVID -19 has large scale implication on human life and has affected the whole world socially, politically, commercially and economically with unprecedented consequences. Businesses are not even able to operate from their premises or been working with lesser manpower, had allowed their employees to work from home and manage to conduct their work online. That on account of the aforesaid disruption lot of business are unable to pay rent, a number of businesses are also not able to use the whole tenanted premises due to certain embargo both statutory and financial. That in order to cut down the recurring expenses, businesses are terminating the lease. However, there are number of instances where the landlord is not taking possession of tenanted premises on various ground inter alia tenure of lease has not expired, non-payment of rent & maintenance charges, damage to the property etc. In some cases the landlord are even not permitting the tenant to remove their belongings and has even locked the tenanted premises.

Then under the law what are the consequences of the landlord's refusal/ failure to take the possession offered by the tenant? Whether the tenant would remain liable to pay the rent/mesne profits in such cases?

The law with respect to the termination of lease by the tenant is well settled. Where the tenant vacates the tenancy premises and notifies the landlord to take the delivery of possession, the lease comes to an end. The refusal of the landlord to accept the possession will amount to delivery of possession and the possession shall be deemed to have been delivered to the landlord though the landlord may not accept the same. This issue arose for consideration in the case of Raja Laksman Singh Vs. State – AIR 1988 Rajasthan 44, where the tenant terminated the tenancy and offered the vacant possession to the landlord who, however, refused to take possession and put conditions to it. It was held by the Hon'ble High Court that the possession shall be deemed to have been delivered as soon as the property was vacated. The relevant portion of the judgment is reproduced as under:-

"23… Vacation of the property together with a notice to the landlord to take the delivery of the possession is submission for the purpose of restoration of the possession and, any impediment put up by the landlord in the matter of redelivery of the possession and not accepting the possession on the ground that some terms and conditions will have to be fulfilled will amount to the delivery of possession and it shall be deemed for all purposes that as soon as the property has been vacated the possession has been delivered though the landlord may not accept the possession.

24. Dy. Government Advocate, Mr. Rafiq, has cited before me the case of President of F.1250 Chowghat Firka P.C.C. Co-operative Society Ltd., A.C. Raman V. Muthaavally Seydali's son Valiyakath Kaithakkal Kunhi Bara Haji, AIR 1953 Mad 996. Their lordships in para 5 has held that the landlord cannot challenged notice or termination of tenancy but must sue for damages for willful negligence of tenant. There is nothing in the section to compel to defendant who has terminated the tenancy and who has offered to deliver vacant possession and whose offer has been refused by the landlord on the ground that the possession shall be taken back only on the payment of Rs.5,000/- by way of damages. If the tenant fails to comply with the demand for damages, however, legitimate it might be the Plaintiff will have a right to sue for damages for the negligence, default or other acts or the Defendant. The remedy which the plaintiff has chosen in this case that he shall take possession only when the conditions are fulfilled i.e. when the damages are paid absolutely without any basis.''

In the case of Onida Finance Limited v. Malini Khanna, 2002 (3) AD (Delhi) 231, the tenant terminated the lease by a one-month notice and called upon the landlord to take the vacant possession of the tenanted premises on the expiry of the notice period and return the security deposit and unadjusted advance rent. The landlord, however, did not take the possession whereupon the tenant filed a suit for recovery of the security and unadjusted advance rent before the Hon'ble Delhi High Court and deposited the keys in Court. The landlord contested the suit on various grounds inter alia that the entire security and the advance rent have been adjusted in the rent after the termination. The landlord filed a counterclaim to claim the rent upto the date of taking the keys from Court. The Hon'ble High Court held that the landlord cannot refuse to take possession upon termination of lease by notice and offer of possession. The relevant portion of judgment is reproduced hereunder:

"28. It is trite that when the lease is terminated by notice and the possession is offered, the landlord cannot refuse to take the possession. If the landlord refuses to take the possession, the lease would not continue. Therefore, even if the contention of the defendant herein was that the tenancy was for a period of three years, she could take possession and thereafter sue the plaintiff for rent. She did not do so. She took calculated risk by challenging the action of the plaintiff in terminating the tenancy and avoided to take possession.

29. ... It is held that the plaintiff had offered to surrender the actual vacant possession of the premises and it is he defendant who did not take the possession thereof on 15th February, 1997 although offered by the plaintiff. Therefore, the valid surrender of the tenanted premises took place on 15th February, 1997 even when the actual possession was taken on 13th September, 1997 when the keys of the tenanted premises were taken by the defendant which was deposited by the plaintiff while filing the suit."

In the case of Tamil Nadu Handloom Weavers‟ Society v. Harbans Lal Gupta - 2009 (107) DRJ 418 (DB), the tenant terminated the lease by a three months notice in terms of the lease deed and demanded the balance security deposit from the landlord. However, the landlord refused to take back the possession and raised various issues with respect to the non-restoration of the suit property as well as non-payment of electricity and water charges whereupon the tenant filed a suit for mandatory injunction and recovery of security deposit. The landlord made a counter claim for recovery of rent up to the date of possession as well as damages to the suit property. The Court appointed a Local Commissioner to visit the suit property and take photographs of the same. The keys of the suit property were handed over to the landlord in the presence of the Local Commissioner. The Court decreed the tenant's suit and dismissed the landlord's counter claim which was challenged before the Hon'ble Delhi High Court. The Division Bench of Hon'ble Delhi High Court relied upon Raja Laksman Singh Vs. State – AIR 1988 Raj 44 and A.C. Raman Vs. Muthavally Seydali's Son Valiyakath Kaithakkal Kunhi Bara Haji – AIR 1953 Madras 996 and held that the termination of the lease by the tenant to be valid. The Hon'ble High Court also observed that the tenant to be liable to pay the rent up to the handing over of the possession because fixtures and fittings were removed only after inspection of the Local Commissioner. The relevant portion of the judgment is reproduced as under:-

" 21. The law with respect to the termination of lease by the tenant is well settled. Where the tenant vacates the tenancy premises and notifies the landlord to take the delivery of possession, the lease comes to an end. The refusal of the landlord to accept the possession will amount to delivery of possession and the possession shall be deemed to have been delivered to the landlord though the landlord may not accept the same."

In the case of Tikka Brijinder Singh Bedi v. Metso Minerals (New Delhi) Pvt. Ltd.- (2010) 114 DRJ 653, the tenant terminated the lease and called upon the landlords to take the possession of the tenanted premises on the notified date and simultaneously return the security deposit. However, the landlords neither came to take over the possession nor paid the security deposit on the ground that the tenant had not restored the premises in the condition in which it was given whereupon the tenant filed the suit for recovery. During the pendency of the suit, the possession was ultimately taken over by the landlords. The tenant claimed the refund of security deposits whereas the landlords claimed the rent from the date of termination upto the date of possession. The disputes between the parties were referred to the Arbitrator, who allowed the tenant's claim for refund of security deposits and rejected the landlord's claim for the rent after termination. The landlord's filed objection to the award before the Hon'ble Delhi High Court which was dismissed.

In the case of Kamal Mangla v. Tata finance Ltd.- 2011 ILR 3 Delhi 682, the tenant issued a 15 days notice to the landlord informing him that the tenanted premises were no longer required and therefore, the landlord should take possession back and return the security deposit failing which the tenant would not be liable for any further rent. However, the landlord neither turned up to take the possession nor returned the security amount. The tenant filed a suit for recovery of the security deposit. The Hon'ble Delhi High Court held that, the lease was validly terminated and therefore, the tenant was not under the obligation to pay rent after the offer of possession to the landlord.

The Hon'ble High Court of Delhi in the matter of Vs. Associated Journals Limited and Anr. Vs. ICRA Limited - MANU/DE/0851/2012 held that the vacation of the leased property by the tenant together with a notice to the landlord to take the delivery of possession would sufficiently discharge the tenant from further obligation to pay the rent. The Hon'ble High Court further held that the possession shall be deemed to be delivered to the landlord as soon as the property was vacated and the possession offered. The Hon'ble High Court also held that the landlord can sue for damage to the property but he cannot decline to receive the possession on that ground. The relevant findings of the Hon'ble High Court are reproduced hereunder:

"15. Thus, it was the absolute right of the respondent to terminate the lease by either giving three months' prior notice of the lease being determined or rent in lieu thereof. This right was not contingent upon any default committed by the appellant."

"17. Now, Section 111 of the Transfer of Property Act deals with the modes of determination of the lease and vide clause (e) thereof provides that a lease can be determined by express surrender and vide clause (f) by an implied surrender. Clause (h) deals with the notice of intention to determine the lease. It is true that as per clause (q) of Section 108 of the Transfer of Property Act, the lessee is bound to put the lessor in possession of the property leased, but this would mean that it is inherent that the landlord should accept the possession of the property whenever it is delivered and cannot claim a right to receive the possession only upon the lessee paying dues or otherwise. We highlight immediately, that in the instant case, it is not the case of the appellant that it had any dues, by way of damages or otherwise, against the respondent. Vacation of a leased property by the lessee together with a notice to the lessor to take delivery of the possession would sufficiently discharge the lessee of any further obligation to pay the rent and any impediment put by the lessor in the matter of delivery of possession would amount to possession being delivered and it shall be deemed for all purposes that as soon as the property was vacated and possession offered, constructive possession would be with the lessor. Even if the lessor has any claim, by way of damage to the property or otherwise, the right of the lessor is not to decline to receive possession and then insist that further lease rental had accrued each month. The right of the lessor is to sue and recover the damages."

The Hon'ble Delhi High Court in the case of H. S. Bedi Vs. National Highway Authority of India – 220 (2015) DLT 179 nicely culled out the following principles of law :-

  1. The lease is determinable by efflux of time, expiry of the period of notice of termination, expresses surrender and implied surrender.

  1. The landlord, upon determination of lease and offer of possession by the tenant, cannot refuse to take over the possession on the ground that the property has been damaged or not restored to its original condition.

  1. In the event of refusal of the landlord to take the possession offered by the tenant, the possession shall be deemed to have been delivered to the landlord and the tenant shall not be liable to pay the rent thereafter.

  1. If the landlord is ready to accept the possession but the tenant refuses/fails to handover the possession, the liability of the tenant to pay the rent shall continue till the handing over of the possession.

  1. The tenant is bound to handover the vacant and peaceful possession of the tenanted premises to the landlord upon determination of lease.

  1. The tenant is bound to restore the tenanted premises in the same condition in which it was taken.

  1. In the event of non-restoration of the tenanted premises to their original condition, the remedy of the landlord is to adjust the damages in the security deposit or sue the tenant for damages after taking over of the possession.

  1. The tenant cannot refuse to hand over the possession till the security deposit is refunded. In the event of non-refund of security deposit by the landlord, the remedy of the tenant is to sue the landlord for refund of security deposit after handing over the possession.

Thus, upon determination of tenancy and offer of possession by the tenant, the landlord cannot refuse to take over the possession, if the landlord refuses to take the possession, the possession shall be deemed to have been delivered to the landlord and the tenant would not be liable to pay rent.

Mr. Niraj Singh is a Partner at RNS Associates. The Author's views are personal.

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