Mesne profit – Compensation for use and occupation of the premises by the tenant – Leased property is situated in Worli area of Mumbai at a very prominent place – Suit for eviction – Trial court dismissed suit – Appellate Bench of Small Causes Court, however, ordered eviction – Revision before High Court – During pendency of revision before High Court, Sumer Corporation applied for impleadment and was added as respondent no. 19 – Respondent no. 19 was claiming to have right, title and interest in the suit property (lease) pursuant to the deed of conveyance executed in the year 2008 for a sale consideration of Rs. 5.50 crores – By impugned order, while admitting the revision application and while staying the eviction decree passed by the Appellate Bench, the High Court inter alia directed the original revisionist to deposit Rs. 2,50,000/per month towards compensation as a condition of stay – Original Respondent no. 19 filed instant appeal – Held: The approach adopted by the High Court is not a sound principle of law to form the basis for determining the compensation in this case – While determining the monthly compensation, High Court considered the fair rate of return @ 6.5% annually on the amount for which the appellant purchased the property in the year 2008, i.e., Rs. 5.50 crores – The aforesaid could not have been the basis while determining the monthly compensation – If the approach adopted by the High Court is accepted and/or approved, in a given case, it may happen that the lessor might have purchased the property forty years back and/or long back and if the said approach is considered and thereafter the monthly compensation is determined, the same cannot be said to be a reasonable compensation – Matter remitted to High Court for fresh determination of compensation for use and occupation of the premises by the tenant.
Partly allowing the appeal, the Court
HELD: 1.1 As observed and held by this Court in the case of Atma Ram Properties (P) Ltd. from the date of the decree of eviction, 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. [Para 7.1][697-F-G]
1.2 In the case of Super Max International Private Limited and Ors., it is further observed and held that in fixing the amount subject to payment of which the execution of the order/decree is stayed, the Court would exercise restraint and would not fix any excessive, fanciful or punitive amount. Therefore, in a revision/appeal preferred by the tenant, who has suffered an eviction decree, the appellate/revisional court while staying the eviction decree can direct the tenant to pay the compensation for use and occupation of the tenancy premises upon the contractual rate of rent and such compensation for use and occupation of the premises would be 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. In the present case, the High Court has not done that exercise and has determined the compensation considering the market value/value at which original respondent No. 19 acquired the rights of the suit property for a sum of Rs. 5.50 cores and thereafter, considering estimated return @ 6.5% per annum, the High Court has determined/awarded the compensation for use and occupation of the premises by the tenant @ Rs. 2,50,000/- per month. The aforesaid method adopted by the High Court while determining the compensation cannot be accepted. The High Court was required to undertake exercise and to determine the compensation 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. Under the circumstances, the matter is to be remanded to the High Court for fresh determination of the compensation for use and occupation of the premises by the tenant, who has suffered the eviction decree, during the pendency and the final disposal of the revision application by the High Court. [Paras 7.2, 7.3][697-H; 698-A-E] Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. (2005) 1 SCC 705 : [2004] 6 Suppl. SCR 843; State of Maharashtra and Anr. v. Super Max International Private Limited and Ors. (2009) 9 SCC 772 : [2009] 13 SCR 801 – relied on.
2. The impugned judgment and order passed by the High Court determining the compensation for the use and occupation of the premises by the tenant @ Rs. 2,50,000/- per month is hereby quashed and set aside. [Para 8][698-F]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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