Source: Supreme Court

Why in News?

Recently a bench of Justices JK Maheshwari and Sanjay Karol reiterated that the appellate court has the power to direct the tenant to pay a reasonable amount, not necessarily the contractual rent, as mesne profit when granting a stay on the execution of an eviction decree.

• The Supreme Court gave this observation in the case of Bijay Kumar Manish Kumar HUF v. Ashwin Bhanulal Desai.

What was the Background of Bijay Kumar Manish Kumar Huf v. Ashwin Bhanulal Desai Case?

• The case involves four different tenancies between the petitioner-landlord and the respondent-tenant in properties located in the Dalhousie area of Kolkata.
• The lease agreements were executed between 1991-1992, and the respondent-tenant allegedly defaulted on rent payments since 2002 and municipal taxes since 1996.
• The petitioner-landlord alleged that the lease was forfeited due to non-payment of rent, and initiated eviction proceedings under the Transfer of Property Act, 1882.
• The matter went through various courts, and the High Court eventually held that the West Bengal Tenancy Act, 1997 would govern the dispute, dismissing the landlord's eviction suits.
• During the pendency of the Special Leave Petitions in the Supreme Court, the petitioner-landlord filed interlocutory applications seeking directions for payment of "monthly occupational charges" at the market rate, claiming Rs. 5,15,05,512/- as dues from the respondent-tenant.
  • This claimed amount was effectively seeking mesne profit or compensation for the period the respondent-tenant continued to occupy the premises after the alleged determination/forfeiture of the lease.

What were the Court’s Observations?

• The Supreme Court noted that while mesne profit is generally awarded after a decree of eviction is passed and stayed, a tenant continuing in possession after their right to occupy is extinguished is liable to compensate the landlord for the period after their right expires.
• The Court observed that the effect of words like 'determination', 'expiry', 'forfeiture', and 'termination' of a lease would be similar, i.e., the rights of the tenant stand extinguished or metamorphosed into a weaker form, and in such situations, mesne profit would be payable.
• Considering the disputed nature of the lease, the location of the premises, and the alleged deprivation of rent for a considerable period, the Court took a prima facie view that the respondent-tenant had been delaying the payment of rent and other dues.
• The Court directed the respondent-tenant to deposit the amount of Rs. 5,15,05,512/- claimed by the petitioner-landlord with the Registry of the Supreme Court within four weeks, subject to the final outcome of the Special Leave Petitions.

What is Mesne Profits?

• As per Section 2(12) of CPC, mesne profits of property mean 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 the person in wrongful possession.
• It is compensation paid to the real owner.
• Objectives:
  • Every person has a right to possess his property. And when he is deprived of such property by another person, he is not only entitled to restoration of possession of his property, but also damages for wrongful possession from that person.
  • The object of awarding a decree for mesne profits is to compensate the person who has been kept out of possession and deprived of enjoyment of his property.
• Principles:
  • The following principles would guide a Court in determining the amount of mesne profits.
    • No profit by a person in wrongful possession.
    • Restoration of status before dispossession of decree holder.
    • Use to which a decree holder would have put the property if he himself was in possession.
• Against Whom Mesne Profits can be Claimed:
  • Wrongful possession of the defendant is the essence of a claim for mesne profits and the very foundation of the defendant’s liability, therefore.
  • A person in wrongful possession and enjoyment of immovable property is liable for mesne profits.
  • Mesne profits can be claimed with regard to immovable property only.
  • Where a plaintiff is dispossessed by several persons, every one of them would be liable to pay mesne profits to the plaintiff.
• Assessment of Mesne Profits:
  • Mesne profits being in the nature of damages, no invariable rule governing their award and assessment in every case can be laid down and the Court may mould it according to the case.
  • In assessing the mesne profits, usually the Court will take into account what the defendant has gained by his wrongful possession of the property.
  • The test to ascertain mesne profits is not what the plaintiff has lost by being out of possession but what the defendant gained or might reasonably and with ordinary prudence would have gained by such wrongful possession.
  • While awarding mesne profits, the Court may allow deductions to be made from the gross profits of the defendant in wrongful possession of the property.