The Single Bench of Justice Sanjeev Kumar while dealing with a Writ Petition under Article 226 of the Constitution allowed a waiver of rent for a period of two years, from August 2019 to July 2021, in favor of the Petitioner, emphasizing the “doctrine of frustration of contract”.
The facts of the matter were that the Petitioner was allotted an outsourcing contract of the Children’s Family Park at Fishpond at Sonamarg, for a period of five years, up to April 2023. However, due unrest, restrictions on internet, etc., post 5th August 2019, when the Government of India abrogated the Article 370 of the Constitution of India and reorganized the State into two Union Territories, followed by Covid-19 pandemic, the Petitioner could not conduct his business smoothly and as such could not pay the installments on time, and the outstanding amount upon expiry of the contract was Rs. 29.195 lacs for which the Respondent-Sonamarg Development Authority had issued a notice calling upon the petitioner to deposit the outstanding amount within a period of seven days. The Petitioner, being aggrieved of the notice, had approached the High Court seeking waiver of the rent for the period of two years commencing August 2019, up to July 2021, that is, the period for which the Petitioner could not run his business for reasons beyond his control.
The Court upon consideration of the facts and circumstances of the case, and law on the point, was of the view that no doubt that the obligation to pay the rent arose out of contractual obligations, voluntarily entered by the petitioner with the Respondents, however, as per admitted position thatemerged from the inter se communications of the respondents, whereby they have admitted that the Petitioner could not perform the contract due toreasons such as reorganization of J&K into two Union Territories, followed by Covid-19 pandemic, it held that the claim of the petitioner that he could not perform his contract with effect from 5th August, 2019 till end of July, 2021, cannot be disputed or discarded. The Court observed, “It is an obvious case of frustration of the contract due to circumstances beyond the control of the petitioner, and held that it would be totally unjust and harsh upon the petitioner to be called upon to pay the rental even for the period the asset in question could not be operated for the reasons beyond his control.
Further, impressing upon the doctrine of Force Majeure, the Court considering the outbreak of Covid-19 pandemic, observed, “if by virtue of an act of God one of the parties to the contract is unable to perform his contract, then the party which is unable to perform his part, cannot be burdened with the liability”.
Moreover, relying upon “Satyabrata Ghose Vs. Mugneeram Bangur and Company and Ors” [“AIR 1954 SC 44] the Court observed that it is beyond any pale of doubt that the petitioner could not execute the contract and operate the asset with effect from 5th August, 2019 till end of July 2021 for the reasons beyond his control, and held that if in such a case, respondents are permitted to recover the rent from him, it would not only create hardships to the petitioner for none of his faults, but it will also not be permissible in view of provisions of Section 56 of the Indian Contract Act.
Therefore, the Court held the Petitioner to be entitled to waiver of rent for the period of two years from 5th August, 2019 to July, 2021, however, to confusion, it held the Petitioner liable to pay an amount of Rs. 7.195 lacs instead of Rs. 29.195 lacs to the respondents, and directed the same to be deposited within a period of six weeks, and on such terms, disposed of the Writ Petition.
