As eateries in Delhi cut menus and bookings amid an LPG supply crisis triggered by the US–Israel–Iran war, and restaurateurs in Mumbai report revenues dropping 20–30%, a key question arises: can restaurant tenants invoke ‘force majeure provision’, like during COVID-19, to seek rent waivers from landlords?
In Mumbai, restaurateurs say revenues have already fallen by 20–30% since the crisis began. Many are also grappling with higher input costs after Mahanagar Gas Limited (MGL) informed them via email that piped natural gas would be priced higher than usual from March 9, according to a Hindustan Times report. While the company did not specify the revised rate, it advised restaurants to reduce gas consumption by 20% amid supply pressures linked to the US-Israel conflict with Iran, which has disrupted oil and natural gas supplies globally.
Legal experts say the ongoing LPG crisis is unlikely to trigger a ‘Force majeure’ clause in restaurant and retail leases, unlike during the COVID-19 pandemic. Although the situation linked to the US-Israel-Iran war has disrupted supply chains and sharply raised commercial LPG costs, the premises remain usable and running a restaurant has not become legally impossible.
Under contract law, circumstances that merely make a business more expensive or less profitable to run are considered economic hardship, rather than force majeure. In practice, this means rent relief is not legally mandated, though commercial realities may still push landlords and tenants to renegotiate terms, say legal experts.
Will the LPG crisis trigger ‘Force Majeure’ for restaurant and retail leases?
Force majeure or an act of God denotes an unforeseen event that renders the performance of contractual obligations impossible. While the term is not expressly defined under Indian law, the principles governing such situations are contained in Sections 32 and 56 of the Indian Contract Act, 1872. What constitutes a force majeure is also contingent upon the nature and language of individual contracts, say experts.
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“The LPG shortage does not qualify as a force majeure event. During the COVID-19 pandemic, the Government recognised the widespread disruption to supply chains and movement as a force majeure, and issued notifications and sanctions accordingly. This enabled parties to invoke or opt for the force majeure clause under the contract. In the present case, no similar notification or declaration has been issued; thus, parties would not be able to claim impossibility to perform on account of force majeure, unless their respective agreements stipulate the same,” explains Saumya Brajmohan, partner at Solomon & Co.
LPG crisis versus COVID-19
While the precedent set during the COVID-19 pandemic gave retail and restaurant tenants leverage to negotiate rent waivers under force majeure, the current LPG crisis resulting from geopolitical conflict is unlikely to offer the same legal protection. “Legally, a sharp increase in operational costs or supply chain disruption is classified as ‘commercial hardship,’ not an ‘impossibility’ to perform a contract. Therefore, landlords cannot be legally compelled to reduce rents, though practical business realities may force them to negotiate,” said Kshitij Bishnoi, Partners at CMS INDUSLAW.
“During the pandemic, businesses were physically shut down due to government-mandated lockdowns. It became legally and physically impossible to use the leased premises. Because of this direct disruption, courts and landlords were more willing to invoke force majeure or grant equitable relief,” he said.
Further, during the wave of COVID-19 lease disputes, Indian courts took a definitive stance on force majeure claims. The courts directed parties to refer strictly to their underlying contracts. The judicial view established that courts cannot grant equitable relief or rent waivers outside of what was negotiated. Instead, if a specific disruptive event is explicitly included as a force majeure trigger within the lease, the appropriate remedy will be provided exactly according to the agreed-upon understanding between the parties, he said.
The current LPG crisis, driven by the US-Israel-Iran conflict, has disrupted supply chains and skyrocketed the cost of commercial LPG. However, the business premises are still available for use, and running a restaurant has not been made legally impossible. In contract law, an event that merely makes a business ‘unprofitable’ or ‘more expensive to run’ is termed economic hardship, not force majeure, he explained.
Unless a lease agreement explicitly lists ‘severe supply chain disruption,’ ‘fuel crisis,’ or ‘indirect acts of war’ as triggers for rent suspension, which is rare in standard commercial leases, tenants cannot unilaterally use this crisis to withhold rent, he said.
Can landlords be compelled to offer rental relief to tenants?
A landlord is not obligated to subsidise a tenant’s business risk. Rent is paid for the use of the property, not as a share of the tenant’s profits (unless it is a specific revenue-sharing lease), he said.
If a restaurant tenant goes to court demanding a rent waiver because LPG is too expensive or scarce, the court is highly likely to rule in favour of the landlord. The Transfer of Property Act dictates that a lease is only frustrated if the property itself is destroyed or rendered permanently unfit for its intended use, he explained.
While the law favours landlords in this scenario, the commercial realities of the retail and restaurant industry dictate a different approach. Just because landlords can’t be compelled doesn’t mean they won’t offer relief, he said.
He points out that if a restaurant goes bankrupt due to the LPG crisis and vacates the property, the landlord faces zero rental income, high costs to find a new tenant, and potential fit-out periods.
Landlords learned during COVID-19 that a rigid stance often leads to empty properties. Many have realised that keeping a good, historically paying tenant afloat through a temporary crisis is more profitable in the long run than enforcing strict lease terms and causing a default, he said.
Revenue-share rental model
The pandemic shifted many F&B (Food & Beverage) leases to a ‘Minimum Guarantee + Revenue Share’ model. In these cases, the landlord is already absorbing some of the shock automatically; as the restaurant’s sales drop due to operational constraints, the rent payout drops alongside it, he said.
Therefore, the LPG crisis cannot be blanketly categorised as a ‘Force Majeure’ event like the COVID-19 lockdowns. The disruption is economic rather than absolute. Tenants cannot legally compel landlords to reduce rent based on fuel scarcity or geopolitical fallout. However, the precedent of cooperation established during the pandemic remains highly relevant, he said.
“The resolution to this crisis will not happen in courtrooms over force majeure clauses, but rather across negotiation tables, where landlords will likely offer temporary deferred payments or maintenance-only periods simply to prevent mass vacancies in their commercial properties,” he added.
