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How the Mense Profits and Use & Occupations Charges are to be assessed

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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

Coram The Hon’ble Mr. Justice Tarlok Singh Chauhan, Judge.

CMP Nos. 8489/2017 and 8471/2018 in C.R. No. 196/2017 and CMP Nos. 8491/2017 and 9115/2018 in C.R. No. 197/2017 

Date of decision : 28.12.2018 

CMP Nos. 8489/2017 & 8471/2018 in C.R. No. 196/2017

Amarjit Singh Bedi ...Petitioner Vs. Sanjay Kuthiala and ors. ...Respondents

CMP Nos. 8491/2017 & 9115/2018 in C.R. No. 197/2017

Amarjit Singh Bedi ...Petitioner Vs. Sanjay Kuthiala and ors. ...Respondents

For the Petitioner(s): Mr. N.K. Sood, Senior Advocate with Mr. Aman Sood, Advocate.

For the Respondent(s): Mr. Vinay Kuthiala, Senior Advocate with Mr. Diwan Singh Negi, Advocate.

Justice Tarlok Singh Chauhan, Judge 

This order shall dispose of applications filed by the tenant for setting aside portion of the operation of the judgment dated 29.5.2017, whereby it upheld the order of eviction passed by the learned Rent Controller on 4.9.2014 being CMP Nos. 8489/2017 and 8491/2017 and also dispose of the applications filed by the landlords being CMP Nos. 8471/2018 and 9115/2018 for modifying/vacating the interim order passed by this Court and for fixation of use and occupation charges against the tenant.

The parties shall be referred to as the “landlords” and the “tenant”.

2. The original land lady, Smt. Brij Bala Kuthiala, who died during the pendency of the proceedings before the learned Rent Controller, filed eviction petition against the tenant from premises situated in building No.3/5, shop No. 3, alley No.3, Middle Bazaar,Shimla on the grounds that( i) the tenant was in arrears of rent of the demised premises w.e.f. 1.3.2001; (ii) the demised premises had been sub let by the tenant in favour of Vidur Singh Thakur without written consent of the landlady in the year 2002; and (iii) premises were bonafidely required by the landlady for reconstruction and rebuilding, which cannot be carried out without the demised premises being vacated.

3. This petition was partly allowed by the learned Rent Controller vide order dated 4.9.2014 on the ground of arrears of rent of the demised premises to the tune of Rs.21,399.32/and that the demised premises were bonafidely required by the landlady for reconstruction and rebuilding, which could not be carried out without being vacated, whereas eviction on the ground of subletting was dismissed.

4. Aggrieved by the order of eviction,the tenant filed an appeal before the learned Appellate Authority, whereas aggrieved by the order of learned Rent Controller whereby the eviction of the tenant was denied on the ground of subletting, the landlord also constrained to file separate appeal before the learned Appellate Court. Both these appeals were taken up together for consideration and vide common judgment dated 29.5.2017, the appeal filed by the landlord was allowed whereby the tenant was also allowed to be evicted on the ground of subletting, whereas the appeal filed by the tenant was dismissed constraining the tenant to file instant revision petitions.

5. At the outset, it needs to be observed that there can be no dispute that once a decree for eviction has been passed in that event the execution of decree for eviction can be stayed only if the tenant is put to such reasonable terms as would in the opinion of the Court, reasonably compensate the landlord for loss occasioned by delay in execution of decree by the grant of stay order, in the event of the appeal being dismissed. There can be further no quarrel that with effect from the date of decree of eviction, the tenant is liable to pay mesne profits or compensation for use and occupation charges of the premises at the same rate at which the landlord would have been able to let out the premises on being vacated by the tenant.

6. It may also be observed that the courts after passing of an order of eviction can always put the occupant of the premises to terms including payment of mesne profit. The very purpose of awarding mesne profit or use and occupation charges is to put a check on the diabolical plans of the tenant who has been ordered to be evicted and ensure that he does not squat on the premises by paying a meager rent. At the same time even the landlord is also compensated to receive higher rent than the contractual rent.

7. This question has been considered in detail by this Court in Champeshwar Lall Sood and another vs. Gurpartap Singh and others, 2017 (2) RCR (Rent), 293, wherein the further question as to how the mesne profits and use and occupation charges are to be assessed, was also considered in the aforesaid case and it was observed as under: 

“21. The fixation of mesne profits and use and occupation charges are to be assessed on the basis of the evidence led by the parties as to the prima facie market value existing at the time of admission of the appeal after the eviction order, which has been exclusively bestowed on the landlord so that he would be able to reasonably compensate for loss caused by delay in execution of the decree by grant of stay order. The Court while doing so is not to be guided by the factors that the parties at one point of time while creating the tenancy had agreed at a meager amount of rent, it would depend upon the material produced before the Court which under no circumstances can be ignored even though thereafter the rent so fixed may work out to be multiple times to the one which was fixed at the time of creation of the tenancy.” 

8. In this factual background, it is, therefore, incumbent upon this Court to first decide the applications filed by the landlords being CMP Nos. 8471/2018 and 9115/2018 for modifying/vacating the interim order passed by this Court and for fixation of use and occupation charges against the tenant. It is averred that the tenanted premises are a shop measuring about 130 sq. ft. in the heart of Shimla Town and situated barely 30 feet from the Scandal Point, The Mall, Shimla and the similar premises in the locality are being let out for over Rs.50,000/per month. The tenanted premises are located at a prime location and can, therefore, easily be let out at a monthly rental of Rs.50,000/.

9. The tenant has contested the applications by filing replies, wherein it is denied that the tenanted premises are 30 feet away from the Scandal Point, but it is admitted that the tenant premises are situated in Alley No.3, which is commonly known as Middle Bazaar, Shimla. However, it is denied that the monthly rental of similar area is Rs.50,000/. It is averred that Shop No.46/14, located in the same vicinity, i.e. Alley No.3 having an area of 200 sq. feet has recently been rented out @ Rs.8000/per month as per agreement annexed with the report as Annexure PA. It is also averred that in the same Alley, shop No.13 owned by Punjab Wakf Board having an area of 177.30 sq. feet has been leased out to one Ravi Gupta, resident of Shanti Sadan, Keleston at the monthly rental of Rs.600/per month as is evident from the lease deed dated 14.3.2002, annexed with the reply as Annexure PB.

10. The landlord has filed rejoinder(s), wherein it is averred that the rent agreement in respect of shop No.46/14 is a manipulated and concocted as it has been executed by the son of Vidhur Singh Thakur, who was earlier sublettee of the tenant. It is further averred that the rent agreement pertains to the year 2013 and it is a common knowledge that the premises, which are subject matter of this agreement, are situated in a narrow alley in the heart of Middle Bazaar and were previously occupied by Kashmiri labourers. Vidhur Singh Thakur had paid a huge amount of ‘Pagri’ both to the Kashmiri labourers as well as to the landlord at the time of taking these premises on rent, whereas the premises, which form the subject matter of the rent agreement, cannot be compared with the present tenanted premises in any manner whatsoever. As regards other agreement annexed with the reply, it is averred that the same pertains to the year 2002 and that too owned by the Punjab Wakf Board, which have grossly been mismanaged and litigation regarding such premises is repeatedly coming up before the Court. It is averred that the rent of the premises similar to the premises in question has been determined by this Court at the rate of Rs.300/per sq. feet. Reliance is placed on a judgment of this Court in Civil Revision No.125/2016, wherein rent of a shop at Ritz Cinema Shimla, which is located at a distance of about 300 metres from Scandal Point has been fixed @ Rs. 400/per sq. feet.

11. I have heard the learned counsel for the parties and have also gone through the material placed on record.

12. At the outset, it needs to be noticed that the provisions of the H.P. Urban Rent Control act, 1987 have been struck down by a Division Bench of this Court in Chaman Lal Bali vs. State of H.P., 2016(3) Shim.L.C. 1593, wherein the Division Bench was dealing with the question where the landlord had claimed that even after an ejectment order having been passed, there was no provision for claiming mesne profits or use and occupation charges and the tenant or sublette or any other unauthorized occupants could conveniently squat over the premises for years and decades together by paying the contractual rent.

13. Negating the said contention, this Court after placing reliance upon on various judgments of the Hon’ble Supreme Court held that from the date of passing of eviction order, the tenant is liable to pay mesne profits or compensation for use and occupation charges 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.

14. Answering the said question, It was held as under:

“23. In Marshall Sons and Co.(I) Ltd. vs. Sahi Oretrans (P) Ltd. and another (1999) 2 SCC 325, the Hon’ble Supreme Court after taking into consideration the invariable delay in Court proceedings held that reasonable mesne profit which may be equivalent to the market rent should be awarded to prevent parties in wrongful possession from taking undue advantage of lengthy delays in the main proceedings and thereafter in execution proceedings. It is apt to reproduce paras 4 and 6 of the judgment which read thus: 

“4. From the narration of the facts, though it appears to us, prima facie, that a decree in favour of the appellant is not being executed for some reason or the other, we do not think it proper at this stage to direct the respondent to deliver the possession to the appellant since the suit filed by the respondent is still pending. It is true that proceedings are dragged for a long time on one count or the other and on occasion become highly technical accompanied by unending prolixity, at every stage providing a legal trap to the unwary. Because of the delay unscrupulous parties to the proceedings take undue advantage and person who is in wrongful possession draws delight in delay in disposal of the cases by taking undue advantage of procedural complications. It is also known fact that after obtaining a decree for possession of immovable property, its execution takes long time. In such a situation for protecting the interest of judgment creditor, it is necessary to pass appropriate orders so that reasonable mesne profit which may be equivalent to the market rent is paid by a person who is holding over the property. In appropriate cases, Court may appoint Receiver and direct the person who is holding over the property to act as an agent of the Receiver with a direction to deposit the royalty amount fixed by the Receiver or pass such other order which may meet the interest of justice. This may prevent further injury to the plaintiff in whose favour decree is passed and to protect the property including further alienation.

6. Having considered the relevant submissions of the parties including the submissions with regard to market rent and without expressing any opinion on the merits of the contentions of the parties in the pending suit, we think it appropriate to dispose of this matter with the following directions: 

(1) That the suit in question be disposed of as expeditiously as possible, preferably within one year from today; 

(2) The respondents are directed to pay the mesne profits/compensation at the rate of Rs.10/per sq. ft. from 1984 till today and at the rate of Rs.20/from today till the disposal of the suit. While making this payment, the payments already made shall be adjusted. So far as the arrears are concerned, it be paid in 12 equal monthly instalments.

24. The principle of determining mesne profits after the eviction order has been passed and the right of landlord to receive higher rent than the contractual rent was established by the Hon’ble Supreme Court in Atma Ram Properties (P) Ltd. vs. Federal Motors (P) Ltd. (2005) 1 SCC 705wherein it was held as under: 

19. 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 decreeholder 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 (l) 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.” 

25. Notably, even though there is no express provision in the Act for the grant of mesne profit, but then, as held by the Hon’ble Supreme Court in Marshall Sons and Co.(I) Ltd. vs. Sahi Oretrans (P) Ltd. and another (1999) 2 SCC 325 that once a decree for possession has been passed and execution is delayed depriving the judgmentcreditor 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.

26. Similar reiteration of law is found in the judgment of Hon’ble Supreme Court in Anderson Wright and Co. vs. Amar Nath Roy and others AIR 2005 SC 2457, wherein it was held as under: 

“5. As held by this Court in Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. , once a decree for eviction has been passed, in the event of execution of decree for eviction being stayed, the appellants can be put on such reasonable terms, as would in the opinion of the appellate court reasonably compensate the decree holder for loss occasioned by delay in execution of the decree by the grant of stay in the event of the appeal being dismissed. It has also been held that with effect from the date of 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 on being vacated by the tenant. While determining the quantum of the amount so receivable by the landlord, the landlord is not bound by the contractual rate of rent which was prevalent prior to the date of decree.” 

27. In State of Maharashtra and another vs. M/s Super Max International Pvt. Ltd. and others AIR 2010 SC 722, the Hon’ble Supreme Court held that while admitting the appeal after ejectment order, it is perfectly open to the appellate or the revisional court to direct the tenant to pay rent higher than the contractual rent, but the Court would not fix any excessive, fanciful or punitive amount. Since the mesne profits are not assessed by the appellate authority on the basis of the evidence led as per the Act, by production of evidence, on fact on issue or relevant facts, but is merely an assessment on the basis of primafacie market rate is existing at the time of admission of the appeal after eviction order, a benefit has been bestowed on the landlord that he would be reasonably compensated for loss occasioned by delay in execution of decree by grant of stay order. The mesne profit or compensation payable to the landlord is generally determined on the basis of the cogent material placed on record by the parties in the shape of the registered lease deeds of the locality indicating the tentative amount of the rent which as the landlord would be entitled to in a case he had rented out the premises at the present market rate existing on the date of ejectment. However, there is no straight jacket formula.

28. It would be noticed that the entire subject matter of mesne profits in the event of a decree of eviction and appeal there against being filed, is a judgemade law chiseled out by the Hon’ble Supreme Court in its various pronouncements (some of which have been cited above), the entire premise of the aforesaid judgments is that once a decree of eviction is passed, the tenant becomes unlawful occupant (subject to his right in appeal/revision), therefore, any contract between the parties also comes to an end. It is for this reason that the Courts have carved out this new principle for ensuring that the tenant in unlawful possession does not further prejudice the landlord, who is otherwise entitled to get possession of his property and for this purpose, have laid down that the tenant must pay a reasonable amount subject to the outcome of the appeal/revision.

29. Even otherwise, the awarding of mesne profits does put a check on the diabolical plans of the tenant who has been ordered to be evicted to further delay the matter and squat on the premises by paying a nominal or meager rent.

15. It would be evidently clear from the aforesaid exposition of law that the courts after passing of an order of eviction can always put the occupant of the premises to terms including payment of mesne profit. The very purpose of awarding mesne profit or use and occupation charges is to put a check on the diabolical plans of the tenant who has been ordered to be evicted and ensure that he does not squat on the premises by paying a meager rent. At the same time even the landlord is also compensated to receive higher rent than the contractual rent.

16. In Atma Ram Properties Pvt. Ltd. (supra), it has been clearly laid down that the tenant with the passing of the decree of eviction is liable to pay mesne profits or compensation for use and occupation charges of the premises at the same rate on which the landlord would have been able to let out the premises and earn rent if the tenant would have vacated the premises.

17. Likewise, in Marshals Sons and Co.(I) Ltd. vs. Sahi Oretrans (P) Ltd. (supra), it was categorically held that once a decree for possession has been passed and execution is delayed depriving the judgmentcreditor 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. At the same time, it was also held that while 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.

19. What is ‘reasonable’ is difficult to define and this expression being a relative term is required to be considered visàvis, the fact situation obtaining in a particular case. A three Hon’ble Judge Bench of Hon’ble Supreme Court in Rena Drego (Mrs) vs. Lalchand Soni and others (1998) 3 SCC 341, considered the expression ‘reasonable’ in the following terms:

[9] It is difficult to give an exact definition of the word 'reasonable'. It is often said that "an attempt to give a specific meaning to the word 'reasonable' is trying to count what is not number and measure what is not space." The author of 'Words and Phrases" (Permanent Edition) has quoted from In re Nice and Schreiber, 123 F, 987, 999 to give a plausible meaning for the said word. He says "the expression 'reasonable' is a relative term, and the facts of the particular controversy must be considered before the question as to what constitutes reasonable can be determined." It is not meant to be expedient or convenient but certainly something more than that. While interpreting the word 'reasonable' in Section 13 of the Act, the Bombay High Court has suggested in Krishchand Moorjimal v. Bai Kalavati, AIR 1973 Bombay 46, "that the word 'reasonable' cannot mean convenient or luxurious, though it may not necessarily exclude the idea of convenience and comfort." However, the expression reasonable can be taken as providing an angle which is conformable or agreeable to reasons, having regard to the facts of the particular controversy.

[10] In Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar, (1987) 4 SCC 497 : (AIR 1987 SC 2316), this Court has stated that "the word 'reasonable' has in law prima facie meaning of reasonable in regard to those circumstances of which the actor, called upon to act reasonably, knows or ought to know." This has been reiterated by Sabyasachi Mukherjee, J. (as his Lordship then was) in Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) P. Ltd., (1989) 1 SCC 532 : (AIR 1989 SC 973).

20. The expression reasonable again came up for consideration before the Hon’ble Supreme Court in Union of India vs. Shiv Shankar Kesari, (2007) 7 SCC 798. It was held as under:

“[8] The word "reasonable" has in law the prima facie meaning of reasonable in regard to those circumstances of which the actor, called on to act reasonably, knows or ought to know. It is difficult to give an exact definition of the word 'reasonable'. Stroud's Judicial Dictionary, Fourth Edition, page 2258 states that it would be unreasonable to expect an exact definition of the word "reasonable'. Reason varies in its conclusions according to the idiosyncrasy of the individual, and the times and circumstances in which he thinks. The reasoning which built up the old scholastic logic sounds now like the jingling of a child's toy. (See: Municipal Corporation of Delhi v. M/s Jagan Nath Ashok Kumar and another (1987) 4 SCC 497. and Gujarat Water Supplies and Sewerage Board v. Unique Erectors (Gujarat) Pvt. Ltd. and another [(1989) 1 SCC 532].

[9] It is often said "an attempt to give a specific meaning to the word 'reasonable' is trying to count what is not number and measure what is not space". The author of 'Words and Phrases' (Permanent Edition) has quoted from in re Nice & Schreiber 123 F. 987, 988 to give a plausible meaning for the said word. He says, "the expression 'reasonable' is a relative term, and the facts of the particular controversy must be considered before the question as to what constitutes reasonable can be determined". It is not meant to be expedient or convenient but certainly something more than that.

[10] The word 'reasonable' signifies "in accordance with reason". In the ultimate analysis it is a question of fact, whether a particular act is reasonable or not depends on the circumstances in a given situation. (See: Municipal Corporation of Greater Mumbai and another v. Kamla Mills Ltd. (2003) 6 SCC 315).” 

21. Even otherwise the expression ‘reasonable’ would only mean “rational according to the dictates of reason and not excessive or immoderate”. An act is said to be reasonable when it is conformable or agreeable to reason, having regard to the facts of the particular controversy. In other words ‘reasonable’ would mean what is just, fair and equitable in contradiction to anything whimsical, capricious etc. The word ‘reasonable’ has in law prima facie meaning of reasonable in regard to those circumstances of which the person concerned is called upon to act reasonably knows or ought to know as to what was reasonable. It may be unreasonable to give an exact definition of the word ‘reasonable’. The reason varies in its conclusion according to idiosyncrasy of the individual and the time and circumstances in which he thinks, as has been held by Hon’ble Supreme Court inVeerayee Ammal vs. Seeni Ammal (2002) 1 SCC 134.

22. Therefore, the term ‘reasonable’, as has been used by the Hon’ble Supreme Court and this Court is required to be interpreted in a manner so as to ensure that the landlord is reasonably compensated for the loss occurred by the delay in execution of the decree by grant of stay order. The rent has to be determined on case to case basis depending upon the cogent material placed on record by the parties and would therefore, normally be dependent upon the occupation, trade or business etc. of the tenant and would further not be dependent solely on the capacity to pay or actual earning of the tenant, who has suffered an order of eviction.

23. Reverting back to the facts of the instant case, the premises in question admittedly are nonresidential and in fact comprise of shop measuring 130 sq. feet.

24. This Court in Chameshwar Lall Sood’s case (supra) was dealing with eviction of premises, which are situated at a distance of about less than 200 metres from the premises in question and this Court on the basis of evidence produced by the landlord fixed the use and occupation charges @ Rs.250/per sq. feet.

25. In the present case, even though the landlord has not produced any such evidence but then he is well within his right to place reliance on the decisions rendered by this Court which can definitely be taken into consideration while fixing the mesne profits and use and occupation charges.

26. The tenant has produced on record two rent agreements/deeds.

27. As regards rent agreement, Annexure PA, produced by the tenant, monthly rental has been fixed @ Rs.8000/qua shop No.46/14 having an area of 200 sq. feet, which is located in Alley No.3, Middle Bazaar Shimla, however, then admittedly this shop has been rented out to one Dinesh Singh Thakur, who is none other than the son of respondent No.3, who happens to be the alleged sublettee in the present case, therefore, much credence cannot be lent to this document.

28. Adverting to the lease agreement annexed with the reply as Annexure PB, it would not be noticed that lease therein is alleged to have been executed on 14.3.2002 and relates to a shop No.13/3 measuring 19.7 sq. yards at Middle Bazaar Shimla. The monthly rental fixed therein is Rs.600/. Much credence cannot be placed upon this document also as 16 years have passed from the date of execution of the alleged agreement.

29. No doubt, even though the landlord has not placed any contemporaneous record, which may remotely indicate or show the prevalent rent in the vicinity, however, nonetheless facts remains that these premises are situated in the Middle Bazaar just about 30 feet away from the Scandal Point, which in itself is a commercial and vending street/area having astoundingly high commercial value and, to my mind, can conveniently be rented out at monthly rental of Rs. 200 sq. feet.

30. At this stage, I may also refer to a judgment passed by a coordinate bench of this Court inC.R. No. 125/2016, titled as Narinder Kumar vs. Rohit Madan and ors. on 3.8.2018, wherein the Court was dealing with the premises situated at the ground floor of building, commonly termed as Ritz Cine Complex and after placing reliance on the judgment rendered by this Court in Champeshwar Lall Sood’s case, fair rent was fixed @ Rs. 250 per sq. feet. Since the demised premises comprise of 130 sq. feet, therefore, tenant is liable to pay use and occupation charges @ Rs.26,000/per month.

31. Accordingly, the interim order dated 6.10.2017 is modified to the extent that the operation and execution of the impugned order passed by the learned Rent Controller and judgment passed by the learned Appellate Authority shall remain stayed subject to the following terms:

(a) The tenant shall deposit use and occupation charges @ Rs. 26,000/per month with effect from the date of eviction order i.e. 4.9.2014 and the same shall be deposited by him in the trial court.

(b) All arrears worked out on the aforesaid basis shall be deposited within 30 days, failing which the eviction order shall forthwith become executable.

(c) All interim orders passed from time to time by this Court shall be deemed to have merged with this order.

32. It goes without saying that any observation touching the merits of the case is purely for the purpose of deciding the question(s) involved in these applications and shall not be construed as an expression of final opinion in the main matters or in any other proceedings.

Applications stand disposed of.

 

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