Civil Procedure Code (CPC)

Unable to pay lease


We are a Pvt Ltd company and entered into a lease agreement to occupy space for our retail center. Due to less revenues we are unable to pay the monthly rentals and have already defaulted payment for 5 months. The lock-in period is for another 2 years.

Do we have any option to get out of the contract? We also do not have any money to pay the pending rentals. What action can the company take against us and how can they recover the amount?

 
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Legal Advisor

Dear Sir,

please go through the exit clauses of the lease deed.

 

Regards 


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Thanks for your reply.

The exit clause states that in case of failure of payment, the company will seize the assets lying within the premises.

My question is, since the value of the assets within the said premises are much less than the balance outstanding, is it possible for the company to even seize the assets from my other locations. Can they if required, even have the right to seize my personal property?

 
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No they have right to seize property within the leased premises only. For recovery balance they have to approach court.

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Better  you  handover the vacant  possession  to lessor and request  them that your financial position is not good  so due  lease amount will be paid lateron.. 


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Advocate

The properties belonging to you lying in some other location cannot be seized by them.  If the property seized for the purpose of settlement of arrears of rental amount is not sufficing the entire amount, they can file a money recovery suit against you for the recovery of remaining amount. 


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Thanks for the replies. If they do file a money recovering suit against me then is it possible that mine and my other directors personal accounts and property be also taken over or will it be only restricted to the companies assets. We do are a Pvt Ltd. company.

 
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Advocate

If the loan is on the company's name, the recovery aspect will be limited to the company's assets alone, in case of any personal collateral security furnished for the purpose of loan, the same will be considered for the purpose of arrears of loan and its interests repayment.   It applies to other directors too.  So it is better to take care if other properties have been offered as security for the purpose of this loan.

 
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If any balance left of lease amount then company's assets can be seize and if any balance is to be recovered it can be recovered from collateral securities.
 
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