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2011 Supreme(Del) 571

IN THE HIGH COURT OF DELHI
Valmiki J. Mehta, J.
M.C. Agrawal Huf
Vs.
Sahara India and Ors.
RFA Nos. 457 and 458 of 2011
Decided On: 02.09.2011

Advocates appeared:
For Appellant/Petitioner/Plaintiff: P.K. Aggarwal, Mercy Hussain, Advs. in RFA No. 458 of 2011, Vivek Kohli and Abhishek Swaroop, Advs. in RFA No. 457 of 2011
For Respondents/Defendant: Vivek Kohli, Abhishek Swaroop, Advs. in RFA No. 458 of 2011, P.K. Aggarwal and Mercy Hussain, Advs. in RFA No. 457 of 2011

Headnote:

mesne profits - landlord- Code of Civil Procedure, 1908 (Section 2(12)) - Contract Act, 1872 (Section 74) - Evidence Act, 1872 (Sections 114, 57) - [Code of Civil Procedure, 1908 (Section 2(12)), Contract Act, 1872 (Section 74), Evidence Act, 1872 (Sections 114, 57)] - The court discussed the entitlement of a landlord to claim mesne profits, the interpretation of Section 2(12) of the Code of Civil Procedure, and the application of Section 74 of the Contract Act. It highlighted that mesne profits are the amount which the premises can fetch if let out on rent during the period of illegal occupation by the tenant. The court also emphasized that a clause in a lease deed providing for double the market rate as mesne profits would be violative of Section 74 of the Contract Act. It further clarified that the interest granted at the rate of 20% per annum was exorbitant and reduced it to 12% per annum. Additionally, the court held that mesne profits would be payable from the date of expiration of the lease period by efflux of time. The court's decision was influenced by the legal provisions and their interpretations, particularly Sections 2(12) and 74, and the principles of reasonable compensation and forfeiture of amounts.

Fact of the Case:

The landlord filed a suit for possession and mesne profits against the tenants for illegal occupation of the premises after the termination of the tenancy. The main issues were the rate of mesne profits, the liability of the tenants to pay mesne profits, and the entitlement of the landlord to claim mesne profits till the date of complete possession of the premises. The court found that mesne profits were payable till the date of depositing the keys by the tenants in the Court. It also discussed the interpretation of legal provisions and the validity of the landlord's claims.

Finding of the Court:

The court found that the trial court erred in awarding mesne profits at double the contractual rate of rent and set aside the judgment to that extent. It also rejected the landlord's argument that the tenants were liable to pay the cost of executive class air tickets in addition to the market rent as mesne profits. The court granted mesne profits at a compounded increase of 15% every year from the contractual rate of rent and reduced the interest granted by the trial court from 20% to 12% per annum. Additionally, the court held that mesne profits would be payable from the date of expiration of the lease period by efflux of time.

Issues: The main issues were the rate of mesne profits, the liability of the tenants to pay mesne profits, and the entitlement of the landlord to claim mesne profits till the date of complete possession of the premises.

Ratio Decidendi: The court's decision was influenced by the interpretation of legal provisions, particularly Sections 2(12) and 74 of the Code of Civil Procedure and the Contract Act, and the principles of reasonable compensation and forfeiture of amounts.

Final Decision: Both the appeals were partially allowed by granting reliefs to the respective parties, including the grant of mesne profits at a compounded increase of 15% every year from the contractual rate of rent, reduction of interest from 20% to 12% per annum, and the determination that mesne profits would be payable from the date of expiration of the lease period by efflux of time.

JUDGMENT

Valmiki J. Mehta, J.

1. These are two cross appeals, one filed by the landlord (RFA No. 458/2011) and the other filed by tenants (RFA No. 457/2011) against the impugned judgment and decree of the trial Court dated 16.5.2011 whereby the suit of the landlord for possession and mesne profits with respect to the premises being a flat bearing No. 817A, 8th Floor, Ambadeep Building No. 24, Kasturba Gandhi Marg, New Delhi, was decreed. The grievance of the landlord is with respect to denial of claim by the trial Court with respect to executive class tickets in addition to the mesne profits, whereas the grievance of the tenants is with respect to awarding mesne profits at double the market rent without any evidence being led by the landlord and which decree is argued to be violative of Section 74 of the Contract Act, 1872. The tenants also question the grant of the high rate of interest at 20%. A minor issue with regard to liability towards the mesne profits is also raised that the same are payable only till 31.12.2004 and not 3.4.2005 as granted by the trial Court. I may finally add that the landlord has argued that the liability for mesne profits continues till date because the entire possession of the tenanted premises has not been given. The main argument as advanced by the landlord, who appeared in person, and who was karta of the landlord HUF however was that since as per the lease deed the tenants were in addition to the payment of rent liable to give a certain number of executive class air tickets, it was argued that the value of these air tickets have to be included in the mesne profits to be awarded. Assistance is sought in this behalf by the landlord of the order of the Supreme Court dated 28.4.2008 and which is an order which had allowed an amendment application filed by the landlord with respect to claim of mesne profits to include the claim towards the executive class air tickets.

2. The fact that there is a relationship of landlord and tenant is not disputed. It is also admitted that premises are outside the protection of Delhi Rent Control Act, 1958 and the tenancy was terminated by a legal notice. The tenants have also in the meanwhile delivered possession of the suit premises by depositing the keys in the Court on 3.4.2005. The main issue which is therefore required to be adjudicated is as to what should be rate of mesne profits which should be allowed to the landlord till 3.4.2005 when the keys of the property were deposited in the Court alongwith the issue as to whether the tenants continue to be liable to pay the mesne profits as the landlord alleges that the complete possession of the property has not yet been given.

3. On the aspect of the date till which mesne profits are payable, there is no doubt that mesne profits will be payable till the keys were deposited by the tenants in the Court on 3.4.2005 inasmuch as there are admissions noted in the impugned judgment that the tenants had removed the walls of the tenanted premises and the original position of the tenanted premises was restored only on 31.12.2004 and whereafter on 3.4.2005 the possession was handed over by depositing the keys in the Court on 3.4.2005. Learned Counsel for the tenants had only weakly disputed the payment of mesne profits from 31.12.2004 till 3.4.2005 and has not disputed the liability to pay mesne profits till 31.12.2004. I therefore hold that mesne profits shall be payable till 3.4.2005.

4. The entitlement of a landlord to claim mesne profits from a tenant who is in illegal possession of the premises after the tenancy is terminated, is governed by Section 2(12) of Code of Civil Procedure, 1908 (Code of Civil Procedure) and which defies mesne profits as under:

Section 2(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 impro









































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