The Supreme Court of India in this case held that Section 56 of Indian Contract Act is inapplicable to lease agreements as a lease is a completed conveyance or an executed contract.
The English common law the rule of "absolute contract" was followed which stated that when a person enters into a contract which absolutely binds him to an act, he cannot escape the liability for the damages for the breach of contract as a result of an inevitable act. This was however, mitigated by the exception that if due to some irresistible event, any party is unable to perform his part of the contract, he will not be made liable. This was called doctrine of frustration. This rule has been incorporated in the Indian laws by Section 56 of the Indian Contract Act.
Section 56 of Contract Act talks about “An agreement to do an act impossible in itself is void”. It states that a contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
Under Section 56, if an event which couldn’t have been reasonably be contemplated by the parties during the making of the contract, which renders performance impossible or unlawful, the contract is deemed to become void, and the parties are not obligated to performance their part of the contract. Therefore where performance is rendered by intervention of law invalid, or the subject matter assumed by the parties to continue to exist is destroyed, or a state of thing assumed to be the foundation of the contract fails, or does not happen, or where the performance is to be rendered personally and the person dies or is disabled, the contract stands discharged.
Section 108 (e) of the Transfer of Property Act states that “under a lease of land there is a transfer of right to enjoy that land. If any material part of the property be wholly destroyed substantially and permanently unfit for the purpose for which it was let out, because of Fire, tempest, flood, violence of an army or a mob, or other irresistible force' the lease may at the option of the lessee, be avoided.
The bench added that where the property leased is not destroyed or substantially and permanently unfit, the lessee cannot avoid the lease because he does not or is unable to use the land for purposes for which it is let to him.
If this judgment was to be taken as a precedent in the times of COVID19, it would mean that even though due to lockdown, the premises are not occupied, the lease stand valid and has to be abided by both the parties. It would mean that the tenant or the occupier will have to find pay the rent accordingly, except when both the parties come to a mutual decision.
