- (1.) This is an application for direction to the non-applicant-petitioner-tenant to deposit mesne profits/damages as per the market rent i.e. @ Rs. 14,000/- p.m. for the use and occupation of the tenanted shop/during the pendency of the present petition. It has been averred that after the appeal filed by the applicant/landlord was allowed the tenant is in illegal use and occupation of the shop in question and the relation of landlord and tenant has been terminated and therefore he is not entitled to continue to pay at the contractual rent @ Rs. 500/- p.m. It is further pleaded that the shop is situated in the main market at Mahavir Marg Road, Nar-naul and the present market rent is not less than Rs. 14,000/- p.m. By way of example the lease deed of a similarly situated shop has been placed on record which is dated 06.04.2012 where the rent has been fixed at Rs. 14,000/- per month with the stipulation of 15% increase in every three years. Other instances have also been given and it has also been averred that apart from the locational similarities the area of the shops are similar to that owned by the applicant. It is therefore prayed that the mesne profits be fixed @ Rs. 14,000/- per month from the date of the eviction i.e. 11.08.2011 along with interest. In reply, it has been disputed that the area of the shop is 167 sq. feet and averred that it is in fact 124 sq. feet while the other shops of which example has been given are of much larger area and are even otherwise locationally better situated. It is further averred that in any case the non-applicant cannot be held entitled to the market rent but only 'some compensation', and that too, from the date of application.
(2.) The dispute ostensibly lies between a narrow compass but has thrown up the following issues:- i) How are the Courts to balance the competing claims between 'mesne profits at the market rates' and 'reasonable compensation for landlord' ii) What is the date from which the mesne profits would be payable iii) Whether interest is payable on mesne profits iv) Whether mesne profits can be increased in lieu of long pendency of appeal v) Whether the amount fixed as mesne profits has to be handed over to the landlord or to be deposited with the Court
(3.) Before discussing the same it may be profitable to review this latest judicial innovation. The East Punjab Urban Rent Restriction Act, 1949 (or for that matter other similar Acts) had no specific provision which laid down as to what would be the capacity in which a tenant would retain the tenanted property in the event of an order of eviction and how the landlord was to be compensated in case the tenant was granted a stay by the Superior Court. The matter came up before the Hon'ble Supreme Court in the matter of M/s. Atma Ram Properties (P) Ltd. v. M/s. Federal Motors Pvt. Ltd., 2005 1 RCR(Rent) 1. In that case, on the petition of landlord an eviction order was passed. The tenant filed an appeal and the Appellate Court while admitting the appeal granted stay of the eviction order subject to the condition that he would deposit in the Court Rs. 15,000/- p.m. in addition to the contractual rent which would be paid directly to the landlord. The Hon'ble Supreme Court in para Nos. 4, 8, 13, 15, 17 & 18 noticed as follows:- "4........ Landlord-tenant litigation constitutes a large chunk of litigation pending in the Courts and Tribunals. The litigation goes on for unreasonable length of time and the tenants in possession of the premises do not miss any opportunity of filing appeals or revisions so long as they can thereby afford to perpetuate the life of litigation and continue in occupation of the premises. If the plea raised by the learned senior counsel for the respondent was to be accepted, the tenant, in spite of having lost at the end, does not loose anything and rather stands to gain as he has enjoyed the use and occupation of the premises, earned as well a lot from the premises if they are non-residential in nature and all that he is held liable to pay is damages for use and occupation at the same rate at which he would have paid even otherwise by way of rent and a little amount of costs which is generally insignificant. 8. It is well settled that mere preferring of an appeal does not operate as stay on the decree or order appealed against nor on the proceedings in the court below. A prayer for the grant of stay of proceedings or on the execution of decree or order appealed against has to be specifically made to the appellate Court and the appellate Court has discretion to grant an order of stay or to refuse the same. The only guiding factor, indicated in the Rule 5 aforesaid, is the existence of sufficient cause in favour of the appellant on the availability of which the appellate Court would be inclined to pass an order of stay. Experience shows that the principal consideration which prevails with the appellate Court is that in spite of the appeal having been entertained for hearing by the appellate Court, the appellant may not be deprived of the fruits of his success in the event of the appeal being allowed. This consideration is pitted and weighed against the other paramount consideration: why should a party having succeeded from the Court below be deprived of the fruits of the decree or order in his hands merely because the defeated party has chosen to invoke the jurisdiction of a superior forum.... 13. In Shyam Sharan v. Sheoji Bhai & Anr., 1977 4 SCC 393, this Court has upheld the principle that the tenant continuing in occupation of the tenancy premises after the termination of tenancy is an unauthorized and wrongful occupant and a decree for damages or mesne profits can be passed for the period of such occupation, till the date he delivers the vacant possession to the landlord. With advantage and approval, we may refer to a decision of the Nagpur High Court. In Bhagwandas v. Mst. Kokabai, 1953 AIR(Nag) 186, the learned Chief Justice of Nagpur High Court held that the rent control order, governing the relationship of landlord and tenant, has no relevance for determining the question of what should be the measure of damages which a successful landlord should get from the tenant for being kept out of the possession and enjoyment of the property. After determination of the tenancy, the position of the tenant is akin to that of a trespasser and he cannot claim that the measure of damages awardable to the landlord should be kept tagged to the rate of rent payable under the provisions of the rent control order. If the real value of the property is higher than the rent earned then the amount of compensation for continued use and occupation of the property by the tenant can be assessed at the higher value. We find ourselves in agreement with the view taken by the Nagpur High Court. 15. We are, therefore, of the opinion that the tenant having suffered a decree or order for eviction may continue his fight before the superior forum but, on the termination of the proceedings and the decree or order of eviction first passed having been maintained, the tenancy would stand terminated with effect from the date of the decree passed by the lower forum. In the case of premises governed by rent control legislation, the decree of eviction on being affirmed, would be determinative of the date of termination of tenancy and the decree of affirmation passed by the superior forum at any subsequent stage or date, would not, by reference to the doctrine of merger have the effect of postponing the date of termination of tenancy. 17. That apart, it is to be noted that the appellate Court while exercising jurisdiction under Order 41 Rule 5 of the Code did have power to put the tenant-appellant on terms. The tenant having suffered an order for eviction must comply and vacate the premises. His right of appeal is statutory but his prayer for grant of stay is dealt with in exercise of equitable discretionary jurisdiction of the appellate Court. While ordering stay the appellate Court has to be alive to the fact that it is depriving the successful landlord of the fruits of the decree and is postponing the execution of the order for eviction. There is every justification for the appellate Court to put the tenant-appellant on terms and direct the appellant to compensate the landlord by payment of a reasonable amount which is not necessarily the same as the contractual rate of rent. In Marshall Sons & Co. (I) Ltd. v. Sahi Ore-trans (P) Ltd. & Anr., 1999 2 SCC 325, this Court has held that once a decree for possession has been passed and execution is delayed depriving the judgment-creditor of the fruits of decree, it is necessary for the Court to pass appropriate orders so that reasonable mesne profits which may be equivalent to the market rent is paid by a person who is holding over the property. 18. 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 (1) 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.";