Defining Mesne Profits in Indian Law

Defining Mesne Profits in Indian Law: A Comprehensive Analysis of Statutory Provisions and Judicial Interpretations

Introduction

The concept of 'mesne profits' is a critical aspect of property law in India, frequently arising in disputes concerning wrongful possession of immovable property. It represents the compensation that a person, entitled to possession of property, can claim from another who has been in wrongful possession of that property. The term itself, with 'mesne' meaning intermediate, signifies profits accruing during a period of wrongful occupation.[9] This article undertakes a comprehensive analysis of the definition of mesne profits under Indian law, anchored primarily in Section 2(12) of the Code of Civil Procedure, 1908, and extensively informed by judicial pronouncements from the Supreme Court and various High Courts. The objective is to delineate the constituent elements, nature, scope, and measure of mesne profits, thereby providing a scholarly understanding of this legal doctrine.

The Statutory Cornerstone: Section 2(12) of the Code of Civil Procedure, 1908

The fountainhead for understanding mesne profits in Indian civil law is Section 2(12) of the Code of Civil Procedure, 1908 (CPC). This provision statutorily defines the term as follows:

"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 improvements made by the person in wrongful possession."[3, 9, 10, 11, 12, 13, 15, 16, 17]

A meticulous dissection of this definition reveals several core components that collectively shape the concept of mesne profits.

"Profits... actually received or might with ordinary diligence have received therefrom"

This component establishes the quantum of mesne profits. It is not limited to the profits actually derived by the person in wrongful possession but extends to those profits that could have been derived through "ordinary diligence."[10, 13] The Patna High Court in Dwarika Rai v. Babu Lakshmi Narain Singh[15, 16], citing the Privy Council, affirmed that the rightful owner is entitled to "the best produce which a man in wrongful possession could have produced with due diligence as a prudent cultivator." The emphasis is on a reasonable and diligent use of the property, not necessarily the highest speculative profit.[10] The person in wrongful possession cannot evade liability by pleading non-utilization of the property.[10]

"Wrongful possession of such property" – The Indispensable Prerequisite

The sine qua non for a claim of mesne profits is the "wrongful possession" of the property by the defendant.[3, 10, 14] As the Supreme Court noted in Lucy Kochuvareed v. P. Mariappa Gounder, mesne profits are damages arising from wrongful possession.[3] The possession must be illegal or without authority.[14] This implies that if the possession is not wrongful, a claim for mesne profits cannot be sustained. For instance, the possession of a co-sharer is generally not considered wrongful unless there is ouster or exclusion of other co-sharers.[14] Similarly, possession by a court-appointed receiver is typically considered possession by the court, not wrongful possession by a party, unless specific facts indicate otherwise.[13]

"Together with interest on such profits" – An Integral Component

The statutory definition explicitly includes "interest on such profits" as part of mesne profits. The Supreme Court in Mahant Narayana Dasjee Varu v. Board Of Trustees, The Tirumalai Tirupathi Devastbanam[21] held that interest is an integral part of mesne profits and must be allowed in its computation. This is based on the theory that the person in wrongful possession, by appropriating the income, also benefits from the interest on such income.[21, 25] The Bombay High Court in Tarquino Raul Henriques v. Damodar Mangalji And Co. Pvt. Ltd.[18, 24, 25] further clarified that interest payable under the definition of mesne profits is a substantive right, distinct from the discretionary interest awardable under Section 34 of the CPC.

"But shall not include profits due to improvements made by the person in wrongful possession" – A Key Exclusion

An important limitation in the definition is the exclusion of profits attributable to improvements made by the person in wrongful possession.[12] This ensures that the rightful owner is compensated for the loss stemming from deprivation of the property in its original state, but the person in wrongful possession is not penalized for value addition resulting from their own efforts or investments in improvements, even if undertaken during the period of wrongful occupation.

Judicial Interpretation of Core Elements

Indian courts have extensively interpreted and elaborated upon the core elements of mesne profits, providing clarity on its nature, scope, and application in various factual matrices.

Nature of Mesne Profits: Compensation for Unlawful Deprivation

The judiciary has consistently characterized mesne profits as a form of compensation to the rightful owner for the loss of use and occupation of the property due to wrongful dispossession.[3, 5, 8, 9, 17] In Lucy Kochuvareed, the Supreme Court described them as "profits that a person in wrongful possession of property generates from it, which should rightfully belong to the rightful owner... a form of damages intended to compensate the owner for the loss of use of the property."[3] Similarly, in Nair Service Society Ltd. v. Rev. Father K.C Alexander, mesne profits were defined as "damages awarded to the rightful owner for the period during which the property was held by someone else unlawfully."[5]

While primarily compensatory, some judicial observations suggest a penal aspect. For instance, the Bombay High Court in PREVIN GOVIND SHARMA v. DINYAR JAL JAMSHEDJI AND ORS. stated, "Plainly put, the mesne profits are a penal compensation."[9] The Calcutta High Court in Punjab National Bank v. Apeejay House Private Limited also noted that "mesne profits are a compensation, which is penal in nature."[17] However, the dominant theme remains compensation for the deprivation suffered by the rightful owner. The term is also used for damages for trespass, a wrongful act relating to immovable property.[10, 12]

Scope of Applicability: Immovable Property

The concept of mesne profits, as defined under Section 2(12) CPC and interpreted by courts, is confined to immovable property. The Himachal Pradesh High Court in Karam Chand v. Punjab National Bank And Others, relying on Wharton's Law Lexicon and the CPC definition, held that mesne profits cannot be claimed with regard to movable property, such as a motor lorry.[12]

Elucidating "Wrongful Possession"

The determination of "wrongful possession" is fact-dependent. Possession may be wrongful from its inception, or it may become wrongful subsequently. For example, a tenant's possession, initially lawful, becomes wrongful upon the valid termination of tenancy and the passing of an eviction decree, especially if they continue to hold over against the landlord's wishes.[2, 10] The Supreme Court in Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd.[2] affirmed the landlord's right to seek compensation, akin to mesne profits, from a tenant during the pendency of an appeal against an eviction order, reflecting current market rates. This principle was also supported by the ruling in Marshall Sons & Co. (I) Ltd. v. Sahi Oretrans (P) Ltd.[4], which asserted that reasonable mesne profits should be paid by tenants holding over against eviction decrees.

In the context of co-owned property, the Rajasthan High Court in Girraj Prasad & Ors. v. Smt. Tara Devi & Ors.[14] held that the possession of one co-sharer is not ordinarily wrongful vis-à-vis other co-sharers, as each co-sharer has a right to every inch of the undivided property. Thus, a claim for mesne profits against a co-sharer is generally not maintainable unless there is evidence of ouster or wrongful exclusion.[14]

Regarding property in the custody of a court-appointed receiver, the Calcutta High Court in Ambalal Sarabhai Enterprises Limited v. Rajeev Daga And Another[13] observed that such possession is generally considered possession by the court, and thus the defendant cannot be said to be in wrongful possession. However, if it is factually established that the defendant was indeed in wrongful possession even during the receivership, mesne profits can be claimed.[13]

The Measure and Assessment of Mesne Profits

The assessment of mesne profits involves determining the quantum of compensation payable. Courts have laid down several guiding principles for this purpose.

Guiding Principle: Defendant's Actual or Potential Gain

A crucial principle in measuring mesne profits is that the assessment is based on the profits the person in wrongful possession actually received or might with ordinary diligence have received. It is not primarily about what the plaintiff (rightful owner) has lost.[10, 13] The Supreme Court in Fateh Chand v. Balkishan Dass[8] observed that "the normal measure of mesne profits is the value of the user of the land to the person in wrongful possession." This was reiterated by the Calcutta High Court in Punjab National Bank v. Apeejay House Private Limited.[17] The test is what the defendant, with ordinary diligence, would have received from the property.[10] The defendant cannot escape liability by claiming non-utilization of the property or failure to derive profits.[10] However, the person in wrongful possession is not liable for the highest possible speculative rates of rent or profit.[10]

Determining Quantum: Relevant Factors

Courts consider various factors to determine the quantum of mesne profits. The rental value of the property or prevailing market rates of rent can be a significant criterion.[2, 20] In Atma Ram Properties, the Supreme Court allowed landlords to seek compensation reflecting current market rates during eviction appeals.[2] The Calcutta High Court in (Rai) Satish Chandra Chaudhuri v. (Maharaja) Sasi Kanta Acharjya Chaudhuri[20] noted that when the person in wrongful possession merely lets the property to others, the rental value is a proper criterion. The nature of the property and its potential uses are also relevant. For agricultural lands, the value of produce that could have been obtained with ordinary diligence is considered.[15, 16]

Interest: An Integral and Substantive Component

As established by Section 2(12) CPC and affirmed by the Supreme Court in Mahant Narayana Dasjee Varu[21], interest is an integral part of mesne profits. The Bombay High Court in Tarquino Raul Henriques[18, 24, 25], citing the Andhra Pradesh High Court's decision in Narayana Dossjee Varu v. Board of Trustees[22], emphasized that interest under Section 2(12) is a substantive right, forming part of the mesne profits themselves, and is distinct from the discretionary power of the court to award interest under Section 34 CPC on the aggregated sum from the date of the decree. The rationale is that the person in wrongful possession who appropriates income from the property also enjoys the benefit of interest on that income.[21, 25]

Procedural Aspects and Evidentiary Considerations

The claim and determination of mesne profits are governed by specific procedural rules under the CPC and principles of evidence.

Decree and Inquiry: Order XX, Rule 12 CPC

Order XX, Rule 12 of the CPC empowers the court, in a suit for recovery of possession of immovable property and for rent or mesne profits, to pass a decree for possession and also direct an inquiry as to mesne profits.[3, 14] This inquiry can cover the period prior to the institution of the suit, as well as the period from the institution of the suit until the delivery of possession, relinquishment of possession by the judgment-debtor, or the expiration of three years from the date of the decree, whichever event occurs first.[3, 14] After the inquiry, a final decree for mesne profits is passed.[14]

Pleadings and Claims: Order VII, Rule 2 CPC

Order VII, Rule 2 of the CPC requires that where the plaintiff sues for mesne profits, or for an amount which will be found due to him on taking unsettled accounts between him and the defendant, the plaint shall state approximately the amount sued for. The Madhya Pradesh High Court in Ambika Prasad Bhawani Sao And Another v. Shiv Shankar Dayal Choube[19] noted that this rule applies to past mesne profits, for which the plaintiff must allege what the defendant could have obtained with due diligence.

Burden of Proof

The burden of proving the quantum of mesne profits generally lies on the plaintiff who claims them.[22] However, a nuanced view was expressed in Mahant Narayana Dossjee Varu v. Board Of Trustees (Andhra Pradesh High Court)[22], citing Ramakka v. Nagesam. It was observed that while the burden of proving profits the person in occupation *might have received* lies on the claimant, the burden of proving profits *actually received* may lie on the person who received them, as this is a matter within their peculiar knowledge (under Section 106 of the Indian Evidence Act, 1872).[22]

Mesne Profits as a Suit for Accounts

A suit for recovery of mesne profits can be viewed, in effect, as a suit for accounts. The person in wrongful possession is required to render an account of the profits derived from the property during the period of unauthorized possession.[11] The Karnataka High Court in Abdul Wajid v. A.S Onkarappa[11] reiterated this proposition.

Historical and Ancillary Aspects

Assignability of Mesne Profits Claims

Historically, there have been views suggesting that a mere right to sue for mesne profits, being a claim in tort for damages against a trespasser, might not be assignable under Section 6(e) of the Transfer of Property Act, 1882, which prohibits the transfer of a mere right to sue. The Madras High Court in K. Chidambaram Pillai v. M.S. Doraiswamy Chetty[23] observed that the definition of mesne profits presupposes that the person liable is a trespasser, and consequently, it being a claim in tort, is not assignable. This perspective requires careful consideration in light of evolving jurisprudence on the nature of actionable claims.

Conclusion

The definition of "mesne profits" under Indian law, primarily rooted in Section 2(12) of the Code of Civil Procedure, 1908, is a multifaceted legal concept refined through extensive judicial scrutiny. It fundamentally represents compensation due to a rightful owner from a person in wrongful possession of immovable property, calculated based on the profits the latter actually received or might have received with ordinary diligence, inclusive of interest. The cornerstone of any claim for mesne profits is the establishment of wrongful possession. While primarily compensatory, the award of mesne profits also serves as a deterrent against unlawful occupation of property. The principles governing its measure, assessment, and procedural adjudication underscore the judiciary's commitment to balancing the rights of property owners with equitable considerations for those in possession. The continued evolution of jurisprudence in this area ensures that the doctrine of mesne profits remains a vital tool for rendering justice in property disputes.

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