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1934 Supreme(SC) 63
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD BLANESBURGH, LORD WRIGHT, AND SIR JOHN WALLIS.
SECRETARY OF STATE FOR INDIA IN COUNCIL - Appellant
Versus
SAROJ KUMAR ACHARJYA CHOUDHURY - Respondents
On Appeal from the High Court at Calcutta.
Decided On : Dec. 18, 1934.
Solicitor for appellant :Solicitor, India Office. Solicitors for respondents: T. L. Wilson & Co.
Mesne profits include profits actually or reasonably obtainable with ordinary diligence, minus collection expenses (customarily 10%). Reasonable diligence requires a fair return, not the maximum possible profit. In the absence of special circumstances, the appropriate interest rate on such profits is 6%.
Headnote:(A) Code of Civil Procedure - Section 2(12) - Mesne profits - Definition and calculation - Mesne profits are those profits which the person in wrongful possession actually received or might with ordinary diligence have received, together with interest. A person in wrongful possession is not liable for failure to realize the highest possible rates of rent and premium, but only for a fair return. (Para 11)
(B) Bengal Act IV of 1868 - Section 3 - Bengal Regulation XI of 1825 - Section 4(3) - Possession of islands - Where possession is taken by revenue authorities of property subject to private ownership, the government is answerable to the aggrieved party in the same way as a trespasser. (Para 11)
(C) Calculation of Profits - Collection Expenses - Profit is the difference between the amount realized and the expenses incurred in realizing it. A customary allowance of 10 per cent for collection charges is permissible even in the absence of specific evidence of actual expenses. (Para 18)
(D) Interest on Mesne Profits - In the absence of special circumstances, 6 per cent is a fair rate of interest and sufficient compensation for the deprivation of rents and profits. (Para 19)
Facts of the case:
A suit was filed for a declaration of title to a share in certain island lands and for mesne profits after the government took possession. The dispute centered on the calculation of these profits, specifically regarding premiums for admitting tenants, the allowance for collection expenses, and the applicable interest rate.
Findings of Court:
The court found that the plaintiffs failed to prove a lack of reasonable diligence by the revenue authorities in collecting rents and premiums. It held that a 10% deduction for collection expenses is customary and should be allowed. It further determined that the interest rate should be 6% rather than 12%.
Issues: Whether the defendant was liable for failing to collect premiums; whether a deduction for collection expenses was permissible without evidence; and whether the interest rate on mesne profits should be 6% or 12%.
Ratio Decidendi: The court reasoned that "reasonable diligence" does not require the realization of the highest possible profits, but a fair return. Since the revenue authorities followed statutory rules to ensure fair and equitable rents, no lack of diligence was established. Furthermore, profit inherently excludes collection costs, and 6% is the standard fair interest rate for mesne profits.
Result: Decree varied by disallowing salami, allowing a 10 per cent deduction for collection expenses, and reducing the interest rate from 12 to 6 per cent.
Legal Category Hierarchy
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property law
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land law
- alluvion and dereliction
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land law
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civil procedure
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mesne profits
- calculation and determination
- interest rates
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mesne profits
Judgement
Law Rep. 62 Ind. App. 53 ( 1934- 1935) Secretary of State v. Saroj Kumar Acharjya Choudhury
208
Appeal (No. 92 of 1933) from a decree and supplementary decree (January 14 and February 25, 1932) of the High Court varying a decree of the Subordinate Judge, first Court, Faridpore (July 13, 1927).
In 1902 the respondents, or their predecessors, instituted a suit against the appellants claiming a declaration of their title to a fourth share in certain char lands possession of which had been taken on behalf of the Government in 1890, and for mesne profits. The respondents obtained a decree under a judgment of the Privy Council, delivered in 1917, which reversed the decree of the High Court and restored the decree of the trial judge.
The accounting period for which mesne profits had to be calculated was from May 29, 1899, to April 15, 1921. The appellant disputed the sum decreed by the High Court (Mukherji and Mitter JJ.) in three respects—namely, (1.) large sums allowed in respect of salami, (2.) the disallowance of collection expenses, (3.) the allowance of 12 per cent, interest.
The facts appear from the judgment of the Judicial Committee.
1934. Nov. 8, 12, 13, 15, 16. Dunne K.C. and Pringle for the appellant. Hypothetical collections for salami should not have been included. Full and equitable rents were imposed in accordance with the Regulations, which aim at there being a reliable class of cultivating tenants rather than the imposition of rack rents and charges. The Government having performed its statutory duty in fixing the rents are not liable for sums beyond that. The question is whether the profits realized were the reasonable profits for Government to have made, not whether a private person might have exacted more. But in any case the evidence did not show that salami could have been obtained ; there was no evidence that the rents were unreasonably low unless salami was charged. The terms of the compromise with the co-sharers were not admissible. The appellant was entitled to a deduction of 10 per cent, in respect of collection charges, that being recognized as the fair allowance in India Me Arthur & Co. v. Cornwall ([ 1892] A. C. 75, 89.); Hurro Doorga Chowdhrani v. Surut Soondari Debi (( 1881) L. R. 9 I. A. 1.); Dhanarajagerji v. Parthasaradhy . (( 1932) I. L R. 57 M. 49, 60.) In Girish Chunder Lahiri v. Shoshi Shikhareswar Roy (( 1900) L. R. 27 I. A. 110, 127.), the Board allowed 10 per cent, for expenses although there was no evidence as to the actual expenses. The rate of interest allowed should have been the statutory rate of 6 per cent. ; there were no circumstances to justify a higher rate Sashikanta Acharyya v. Sarat Chandra Chaudhuri (( 1921) 34 Cal. L. J. 415, 420.); Dhanarajagerji v. Parthasaradhy (3) ; Girish Chander Lahiri v. Sasi Sekhareshwar Roy . (( 1905) I. L.
R. 33 C. 329.) [As to the nature of mesne profits, reference was made to Gurudas Kundu Chowdhury v. Hemendra Kumar Roy (( 1929) L. R. 56 I. A. 290.) and Gray v. Bhagu Mian . (( 1929)
L. R. 57 I. A. 105.)]
De Gruyther K.C. and Parikh for the respondents. Ben. Act IV. of 1868 applied only to Government land which emerged, and therefore did not apply to the present case. The land in suit was a reformation in situ of part of the respondents zamindari and was their property upon emergence Lopez v. Muddun Mohun Thakoor . (( 1870) 13 Moo. I. A. 467.) Even if the Act applied the Government was liable in respect of mesne profits upon the same basis as an ordinary trespasser—namely, the whole profit which might have been made with diligence Surendra Nath Mitter v. Secretary of State for India . (( 1920) 35 Cal. L. J. 196.) That ordinarily includes salami Birendra Kishor Manikya v. Secretary of State for India (( 1920) I. L. R. 48 C. 766.) ; Dhanarajagerji v. Parthasaradhy , (I. L. R. 57 M. 49.) Apart from the compromises, the evidence showed that a further 5 per cent, at least might have been obtained as salami. The rate of interest on the mesn
