Union of India v. Dr. Rustom Sam Boyce

14) In Atma Ram Properties, the Apex Court has dealt with three issues of (i) jurisdiction of the Appellate Court to pass order for payment of amount representing the losses occasioned by delay in execution of the decree by grant of stay order; (ii)the date from which tenant becomes liable to pay mesne profits or compensation for use and occupation of the premises in cases governed by the provisions of Delhi Rent Control Act, 1958 and (iii) effect of doctrine of merger resulting in postponing the date of termination of tenancy. For the purpose of this case, Issue No.(ii) decided by the Apex Court in Atma Ram Properties is relevant. The findings recorded regarding Issue NO. 2 in the judgment are as under:

11. Under the general law, and in cases where the tenancy is governed only by the provisions of Transfer of Property Act, 1882, once the tenancy comes to an end by determination of lease under Section 111 of the Transfer of Property Act, the right of the tenant to continue in possession of the premises comes to an end and for any period thereafter, for which he continues to occupy the premises, he becomes liable to pay damages for use and occupation at the rate at which the landlord could have let out the premises on being vacated by the tenant. In the case of Chander Kali Bai & Ors. the tenancy premises were situated in the State of Madhya Pradesh and the provisions of the M.P. Accommodation Control Act, 1961 applied. The suit for eviction was filed on 8th March 1973 after serving a notice on the tenant terminating the contractual tenancy w.e.f. 31st December 1972. The suit came to be dismissed by the trial Court but decreed in first appeal decided on 11th August, 1975. One of the submissions made in this Court on behalf of the tenant-appellant was that no damages from the date of termination of the contractual tenancy could be awarded; the damages could be awarded only from the date when an eviction decree was passed. This Court took into consideration the definition of tenant as contained in Section 2(i) of the M.P. Act which included "any person continuing in possession after the termination of his tenancy" but did not include "any person against whom any order or decree for eviction has been made". The court, persuaded by the said definition, held that a person continuing in possession of the accommodation even after the termination of his contractual tenancy is a tenant within the meaning of the M.P. Act and on such termination his possession does not become wrongful until and unless a decree for eviction is passed. However, the Court specifically ruled that the tenant continuing in possession even after the passing of the decree became a wrongful occupant of the accommodation. In conclusion the Court held that the tenant was not liable to pay any damages or mesne profits for the period commencing from 1st January 1973 and ending on 10th August 1975 but he remained liable to pay damages or mesne profits from 11th August 1975 until the delivery of the vacant possession of the accommodation. During the course of its decision this Court referred to a decision of Madhya Pradesh High Court in Kikabhai Abdul Hussain Vs. Kamlakar, wherein the High Court had held that if a person continues to be in occupation after the termination of the contractual tenancy then on the passing of the decree for eviction he becomes a wrongful occupant of the accommodation since the date of termination. This Court opined that what was held by the Madhya Pradesh High Court seemed to be a theory akin to the theory of "relation back" on the reasoning that on the passing of a decree for possession, the tenant’s possession would become unlawful not from the date of the decree but from the date of the termination of the contractual tenancy itself. It is noteworthy that this Court has not disapproved the decision of the Madhya Pradesh High Court in Kikabhai Abdul Hussain’s case but distinguished it by observing that the law laid down in Kikabhai Abdul Hussain’s case was not applicable to the case before it in view of the definition of ’tenant’ as contained in the M.P. Act and the provisions which came up for consideration of the High Court in Kikabhai Abdul Hussain’s case were different.

17. In the Delhi Rent Control Act 1958, the definition of ’a tenant’ is contained in clause (l) of Section 2. Tenant includes ’any person continuing in possession after the termination of his tenancy’ and does not include ’any person against whom an order or decree for eviction has been made’. This definition is identical with the definition of tenant dealt with by this Court in Chander Kali Bai’s case. The tenant-respondent herein having suffered an order for eviction on 19.3.2001, his tenancy would be deemed to have come to an end with effect from that date and he shall become an unauthorized occupant. It would not make any difference if the order of eviction has been put in issue in appeal or revision and is confirmed by the superior forum at a latter date. The date of termination of tenancy would not be postponed by reference to the doctrine of merger.

19. To sum up, our conclusions are:- (1) while passing an order of stay under Rule 5 of Order 41 of the Code of Civil Procedure, 1908, the appellate Court does have jurisdiction to put the applicant on such reasonable terms as would in its opinion reasonably compensate the decree-holder for loss occasioned by delay in execution of decree by the grant of stay order, in the event of the appeal being dismissed and in so far as those proceedings are concerned. Such terms, needless to say, shall be reasonable; (2) in case of premises governed by the provisions of the Delhi Rent Control Act, 1958, in view of the definition of tenant contained in clause (l) of Section 2 of the Act, the tenancy does not stand terminated merely by its termination under the general law; it terminates with the passing of the decree for eviction. With effect from that date, the tenant is liable to pay mesne profits or compensation for use and occupation of the premises at the same rate at which the landlord would have been able to let out the premises and earn rent if the tenant would have vacated the premises. The landlord is not bound by the contractual rate of rent effective for the period preceding the date of the decree; (3) the doctrine of merger does not have the effect of postponing the date of termination of tenancy merely because the decree of eviction stands merged in the decree passed by the superior forum at a latter date. (emphasis added)

15) Thus, in Atma Ram Properties the Apex Court held that in case of premises governed by the provisions of the Delhi Rent Control Act, the tenancy does not stand terminated merely by its termination in the general law and that the same terminates with passing of the decree for eviction. Since the Apex Court had referred to its judgment in Chander Kali Bai v. Jagdish Singh Thakur[5], it would be apposite to refer to that judgment as well. The Apex Court has considered definition of the term ‘tenant’ under Madhya Pradesh Accommodation Control Act 1961 and held as under:

8. For appreciation of the third point urged for the appellant it would be again useful to refer to a few corresponding provisions of the two Acts. In the 1955 Act, tenant was defined in clause (f) of Section 3 to mean “a person by whom rent is payable or but for a contract express or implied would be payable for any accommodation and includes any person occupying the accommodation as a sub-tenant”. In the 1961 Act, however, the definition of tenant has been widened and Section 2(i) reads thus: “ ‘tenant’ means a person by whom or on whose account or behalf the rent of any accommodation is, or, but, for a contract express or implied, would be payable for any accommodation and includes any person occupying the accommodation as a sub-tenant and also, any person continuing in possession after the termination of his tenancy whether before or after the commencement of this Act; but shall not include any person against whom any order or decree for eviction has been made.” On a plain reading of the definition aforesaid it is clear that a tenant even after the termination of his contractual tenancy does not become an unauthorised occupant of the accommodation but remains a tenant. It has been pointed out by this Court in Damadilal v. Parashram [(1976) 4 SCC 855: 1976 Supp SCR 645] that such a tenant is conveniently called a statutory tenant. Whether the expression aforesaid borrowed from the English law is quite apposite or not, but, what is certain is that a person continuing in possession of the accommodation even after the termination of his contractual tenancy is a tenant within the meaning of the Act and on such termination his possession does not become wrongful, until and unless a decree for eviction is made. If he continues to be in possession even after the passing of the decree, he does so as a wrongful occupant of the accommodation.

9. Mrs Seth in support of her argument rightly pressed into service a few other provisions of the Act. Section 13(1) giving protection against eviction on the ground of default in payment of rent provides therein that even after the institution of the suit if he clears off the amount of rent due within a period specified in the section and thereafter “continue to deposit or pay, month by month, by the fifteenth of each succeeding month a sum equivalent to the rent at that rate” calculated at the rate of rent at which he was paying earlier, no decree for eviction can be passed. The conclusion is inevitable, therefore, that if a suit is filed on the ground of non-payment of rent after termination of the contractual tenancy, the tenant still continues to be a tenant liable to pay rent not only for the past period but in future also. In absence of a decree of eviction the person in occupation of the accommodation continues to be a tenant and is not liable to pay any damages as his occupation is not unauthorised or wrongful even after the termination of the contractual tenancy. In Damadilal case, Gupta, J. delivering the judgment of this Court has said at p. 653 (SCC p. 864) with reference to the definition of tenant in Section 2(i) of the Act: “The definition makes a person continuing in possession after the determination of his tenancy a tenant unless a decree or order for eviction has been made against him, thus putting him on par with a person whose contractual tenancy still subsists. The incidents of such tenancy and a contractual tenancy must therefore be the same unless any provision of the Act conveyed a contrary intention. That under this Act such a tenant retains an interest in the premises, and not merely a personal right of occupation, will also appear from Section 14 which contains provisions restricting the tenant's power of sub-letting.”

10. In Kikabhai Abdul Hussain v. Kamlakar [1974 MPLJ 485] a Bench of the Madhya Pradesh High Court seems to have opined even with reference to the 1961 Act that if a person continues to be in occupation after the termination of the contractual tenancy then on the passing of the decree for eviction he becomes a wrongful occupant of the accommodation since the date of termination. It seems a theory akin to the theory of “relation back” has been applied in the sense that if no decree for eviction is passed then the person is not in unlawful occupation but on the passing of such a decree his possession becomes unlawful not from the date of the decree but such a decree makes his occupation unlawful from the date of the termination of the contractual tenancy. Whatever could be said with reference to the provisions of 1955 Act it is clear to us that the law so enunciated by the High Court with reference to 1961 Act is not correct.

12. For the reasons stated above it is manifest that the defendants remained in occupation of the accommodation on and from January 1, 1973 as a tenant, conveniently to be called statutory tenant, under the Act. Their occupation was not unauthorised or wrongful until a decree for eviction was passed by the first appellate court on August 11, 1975. Their occupation became unauthorised or wrongful only from that date. They are not, therefore, liable to pay any damages or mesne profits for the period commencing from January 1, 1973 and ending on August 10, 1975. Decree for damages either in respect of the two months prior to the institution of the suit or for the subsequent period must therefore be set aside. The defendantappellants will be liable to pay damages or mesne profits at the rate of Rs 125 per month (the rate of damages could not be and was not challenged before us) from August 11, 1975 only, until the delivery of the vacant possession of the accommodation. (emphasis added)

16) In Delhi Rent Control Act, 1958 definition of the term ‘tenant’ under Section 2(l) included ‘a person continuing in possession after termination of his tenancy’. Similarly under Madhya Pradesh Accommodation Control Act 1961 the term ‘tenant’ includes ‘person continuing in possession after the termination of his tenancy’. Definition of ‘tenant’ in both the enactments seems to be similar to the one under Clause (h) of Section 5 of the Bombay Rent Act, under which ‘tenant’ includes any person remaining in occupation after the determination of the lease in possession’. In that view of the matter, possession of the tenant upon passing of decree for possession under Section 12 of the Bombay Rent Act becomes unlawful not from the date of determination of the lease but from the date of the decree. Thus possession of Applicants-Defendants in respect of the suit premises remained lawful till passing of the decree dated 4 September 2000.

17) Section 2(12) of the Code defines the term ‘mesne profits’ as under: (12) “mesne profits” of property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but shall not include profits due to improvements made by person in wrongful possession.

18) Thus mesne profits means those profits which a person in wrongful possession of the property has actually received or could have received. Thus ‘wrongful possession’ is required to be established for claiming mesne profits. Since possession of the Applicants- Defendants of the suit premises till passing of the decree was not wrongful within the meaning of Section 2(12) of the Code, mesne profits could not have been directed to be paid from the date of institution of the suit. Possession of the Applicants-Defendants in respect of the suit premises became wrongful only on the date of passing of the decree i.e. 4 September 2000 and therefore mesne profits could have been directed to be paid only from 4 September 2000 till the date of execution of the decree i.e. 20 November 2002.

19) Mr. Khandeparkar has strenuously submitted that since the decree dated 4 September 2000 directed conduct of enquiry from the date of filing of the suit, the Court conducting mesne profits enquiry acts as a Executing Court and therefore could not have gone beyond the decree. I am unable to agree. Firstly, the Court conducting mesne profits enquiry cannot be equated with that of the Executing Court. It is an independent inquiry distinct from the main decree already passed, which can be independently put to execution. Secondly, if tenant continues to be in lawful possession of the suit premises till the date of passing of the decree and if mesne profits are not recoverable in law from the date of institution of the suit, mere direction by the Trial Court for conduct of enquiry under Order 20 Rule 12(1)(c) of the Code from the date of institution of the suit would not mean that the Defendants-Judgment Debtors can be fastened with liability to pay to the Plaintiff profits earned by them or could have been earned by them during the period they remained in lawful possession of the suit premises. Since possession during pendency of suit is not wrongful, no mesne profits become payable for period prior to the date of decree even if there is a direction to determine mesne profits from date of institution of suit.

20) Even if Mr. Khandeparkar’s submission of impermissibility of altering the main decree is to be accepted, the Court, upon conducting inquiry from the date of institution of suit, can always hold that mesne profits are not payable prior to date of decree since possession was not wrongful.

21) Mr. Khandeparkar has contended that the point of impermissibility to determine mesne profits from the date of filing of the suit was never raised by Applicants-Defendants before the Trial Court. In this regard, he has taken me through the Affidavit-in-Reply filed by the Applicant-Union of India in the mesne profits application. True it is that the Applicant-Union of India apparently did not raise the issue of fixation of mesne profits from the date of institution of the suit in the Affidavit-in-Reply and mainly raised the issue about quantum of mesne profits therein. The issue however is whether Applicants can be prevented from raising the said point before this Court. In my view, liability of a tenant to pay mesne profits during pendency of suit for eviction is a point of law. Though Mr. Khandeparkar has sought to suggest that the said point of law is deeply rooted in facts, I am unable to agree with the said contention. Possession of a tenant after determination of tenancy does not automatically become unauthorised under the provisions of the Bombay Rent Act. Under Section 12(3) of the Bombay Rent Act, the tenant is entitled to pay or tender the arrears of rent on the first day of hearing of suit or on the date fixed by the Court and obviate decree for eviction on the ground of default in payment of rent. Similarly in a suit filed by landlord for recovery of possession of tenanted premises on the ground of bonafide requirement, possession of tenant cannot become wrongful till landlord proves his/her requirement and more importantly the comparative hardship. Thus the concept of possession of tenant protected by rent control legislation becoming wrongful from the date of institution of suit is unknown to law.

22) Thus, even after determination of tenancy by a landlord, tenant’s possession becomes unlawful only upon passing of decree of eviction. Since possession of tenant is lawful during pendency of suit, mesne profits cannot be directed to be paid by him for his possession during continuation of the suit. Therefore, whether Applicants raised this point during the course of mesne profits enquiry or not becomes irrelevant. Once Applicants’ possession in respect of the suit premises is found to be lawful during pendency of the suit, they cannot be made to liable pay mesne profits from date of filing of suit merely on account of non-raising of the said plea before the Court. If Mr. Khandeparkar’s contention is accepted, the same would mean that mesne profits would become payable contrary to the definition of the term ‘mesne profits’ under Section 2(12) of the Code. Liability to pay mesne profits is in accordance with the provisions of law and not merely based on pleadings raised by parties. In my view, therefore irrespective of position whether Applicants raised the issue of liability for payment of mesne profits before the date of decree or not, Applicants cannot be made liable to pay the same because their possession of the suit premises till the date of passing of the decree was not wrongful within the meaning of Section 2(12) of the Code.

23) Mr. Khandeparkar has also sought to contend that even before this Court, the point of liability to pay mesne profits before the date of decree is not raised. I am unable to agree. In ground clause (e) to (h), Applicants have pleaded in the Revision Applications as under: (e) whether both the courts below are justified in ignoring the fact that suit was filed on 29/07/1979, tenancy of the Applicants/Ori. Defendants determined only on 20/11/2002 when the decree of was eviction was passed by the Judge, Small Causes Court, Mumbai in RAE & R. Suit No. Suit No. 1429/4857 of 1979; (f) Whether both the courts below are justified in ignoring the point of law that the Applicant/Ori. Defendants being protected tenant, and liable to pay only contractual rent and/or standard rent during the pendency of the suit as the tenancy of the Defendant determined on 20/11/2002 by eviction decree; (g) whether both the courts below are justified in directing the Applicants/Ori. Defendants to pay mesne for period from the date of filing of the i.e. 29/07/1979 till 20/11/2002 along with 6% interest per annum; (h) whether both the courts below are justified in not considering that application for determination of mesne profit is not execution of the decree and that the court conducting the enquiry into mesne profit has power and jurisdiction to decide for which period the Applicant/Ori. Defendant would be liable to pay the mesne profit;

24) Thus, the ground of impermissibility to direct payment of mesne profits prior to the date of decree is clearly raised in the Revision Applications.

25) It therefore held that Applicants are liable for payment of mesne profits from the date of the decree i.e. 4 September 2000 till the date of execution of the decree i.e. 20 November 2002.

26) The next issue is about the quantum of mesne profits determined by the Small Causes Court as enhanced by the Appellate Bench. It appears that the suit premises comprised of four storeyed building comprising of 36 rooms and the rooms were spread over 12,000 sq.ft. The suit premises are located in upmarket area of Mumbai City of Gowalia Tank Road (August Kranti Marg) near Grant Road Station. Considering the nature and location of the suit premises, it cannot be contended that the quantum of mesne profits fixed by the Appellate Bench is excessive so as to warrant interference by this Court in exercise of revisionary jurisdiction under Section 115 of the Code.

27) Resultantly, the Civil Revision Applications partly succeed and I proceed to pass the following order:

(I) Order dated 3 March 2022 passed by the Appellate Bench of Small Causes Court as well as order dated 9 May 2014 passed by the Small Causes Court are set aside to the extent of direction for payment of mesne profits in respect of the suit premises from the date of filing of the suit i.e. 29 July 1979. It is directed that Applicants-Defendants shall be liable to pay mesne profits in respect of the suit premises from the date of decree i.e. 4 September 2000 till 20 November 2002.

(II) Accordingly, Applicants-Defendants shall pay to the

Respondent/Decree-holder mesne profits @ Rs.2,50,000/per month for the period from 4 September 2000 till 20 November 2002 alongwith simple interest @ 6% p.a.

(III) The amount representing mesne profits at the rate of

Rs.2,50,000/- for the period from 4 September 2002 to 20 November 2002 alongwith 6% interest p.a. is permitted to be withdrawn by the Respondent/Decree-holder from the amount deposited by Applicants in the Small Causes Court. The balance amount shall be refunded to Applicants-Defendants alongwith accrued interest.

28) With the above directions, both the Civil Revision Applications are partly allowed and disposed of. [SANDEEP V. MARNE, J.]

29) After the judgment is pronounced, Mr. Khandeparkaer would request for stay of directions for refund of the deposited amount to the Applicants-Defendants. The request is opposed by the learned counsel apearing for the Applicants-Defendants. In my view, the refund is to be made to the Applicants/Defendants only after the Respondent/decreeholder withdraws the amount of mesne profits decided by this Court. The same is likely to take some time. In that view of the matter, the Applicants shall not withdraw the amount deposited in the Small Causes Court for a period of eight weeks from today. [SANDEEP V. MARNE, J.]