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Anderson Wright & Co. v. Amar Nath Roy And Others
Factual and Procedural Background
The respondents are the owner-landlords of premises measuring approximately 5678–6000 sq. ft. on the third floor of a building located in a prime area of Kolkata, proximate to key governmental and commercial establishments. The tenancy, created in 1939, carries a contractual rent of Rs 853.87 per month.
Alleging that the appellants had sub-let or otherwise parted with possession of the premises to four companies, the respondents instituted eviction proceedings. The trial court dismissed the suit, but the High Court reversed that decision on 12-3-2004, decreeing eviction of the appellants.
On 23-4-2004 the Supreme Court granted leave to appeal and stayed execution of the eviction decree. During the pendency of the appeal, the respondents filed IA No. 4 of 2004 seeking an order directing the appellants to pay or deposit mesne profits each month as a condition for continuation of the stay.
Legal Issues Presented
- Whether, following the stay of an eviction decree, the appellate court can require the tenant-appellants to pay mesne profits/compensation for use and occupation of the premises during the pendency of the appeal.
- If so, what constitutes a reasonable quantum of mesne profits in the circumstances of this case.
Arguments of the Parties
Respondents' Arguments
- The decree-holders should receive Rs 1,80,000 per month (≈ Rs 30 per sq. ft.) as mesne profits, reflecting the market rate in the locality.
- The landlords are obliged to pay property tax of Rs 2,32,000 per annum while receiving only Rs 853.87 per month from the appellants.
Appellants' Arguments
- The appellants are liable only for the standard rent, notwithstanding the eviction decree being under challenge.
- The requested amount of Rs 1,80,000 per month is excessive.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd., (2005) 1 SCC 705 | Post-decree, a tenant who obtains a stay of eviction may be put on terms to pay mesne profits equivalent to the rent the landlord could obtain on open market; contractual rent is not controlling after the decree. | Relied upon to dismiss the appellants’ contention that only standard rent is payable and to justify fixing market-based compensation during the stay. |
Court's Reasoning and Analysis
The Court reaffirmed the principle laid down in Atma Ram Properties that once an eviction decree is passed, a tenant seeking its stay must compensate the landlord for the delay in execution. It held that:
- The appellants’ submission that only standard rent can be demanded “needs a summary dismissal” in light of Atma Ram Properties.
- Both parties produced affidavits indicating prevailing rents in the building: Canara Bank pays Rs 25 per sq. ft.; another tenant (Rumpa Ghosh, inducted in 2002) pays Rs 32 per sq. ft.
- Balancing these figures and treating the matter as an interim arrangement, the Court fixed tentative mesne profits at Rs 15 per sq. ft. from the date of the High Court decree (12-3-2004), calculated on 5678 sq. ft.—the area admitted by the appellants.
- The Court emphasised that this rate is provisional and subject to final adjudication in appropriate proceedings (e.g., Order 20 Rule 12 CPC).
Specific directions structured payment schedules, provided for set-off of amounts already paid, permitted the respondents to institute proceedings for final determination of mesne profits, and prescribed consequences for non-compliance by either party.
Holding and Implications
IA No. 4 of 2004 was disposed of with conditional directions: the appellants must pay/deposit mesne profits at Rs 15 per sq. ft. from 12-3-2004, make the first lump-sum deposit by 30-6-2005, and continue monthly payments thereafter; failure to comply will vacate the stay of eviction, whereas non-compliance by the respondents with the refund undertaking will bar them from receiving amounts directly.
Implications: The order ensures interim compensation to the landlords while the appeal is pending, reinforcing the precedent that tenants cannot hold over rent-controlled premises during appellate stays without paying market-aligned compensation. No new legal principle is announced; the Court applies and operationalises the rule in Atma Ram Properties.
R.C Lahoti, C.J— This order disposes of IA No. 4 of 2004 filed by the respondents seeking direction to the appellants to pay or deposit, month by month, a fixed amount by way of mesne profits, as a condition precedent to the order staying execution of decree for eviction of the appellants.
2. The suit property is situated in a prime locality of Kolkata. Governor House, High Court, Assembly, GPO, Reserve Bank of India, Income Tax Office, Writers' Building, Telephone Bhawan, etc., are situated in the same area and some only at a walking distance from the suit property. Admittedly, the respondents are owner-cum-landlords of that part of the property which is held on tenancy by the appellants. The area in possession of the appellants is situated on the third floor and admeasures 6000 sq ft according to the respondents but is 5678 sq ft according to the appellants. The tenancy was created in the year 1939 at a monthly rent of Rs 853.87p per month.
3. The respondents initiated proceedings for the eviction of the appellants on the ground of the premises having been sub-let or parted with possession by the appellants. The eviction was denied by the trial court. The appeal preferred by the respondents has been allowed by the High Court and the appellants have been directed to be evicted. The High Court has found that the tenancy premises were sub-let or parted with possession by the appellants in favour of four companies, the alleged sub-tenants, who were carrying on business in the suit premises. Out of these four companies, three were still carrying on business while the fourth had stopped business by the time the case came to be decided.
4. On 23-4-2004, leave to appeal was granted by this Court to the appellants and the judgment and decree for eviction passed by the High Court has been directed to remain stayed. IA No. 4 of 2004 has been filed by the respondents, seeking direction to the appellants to pay an amount of Rs 1,80,000 per month to the respondents during the hearing of the appeal. It is submitted that the suit premises can fetch a rent @ Rs 30 per sq ft. The property tax payable by the respondents to the local authority is Rs 2,32,000 per annum, while the appellants are paying a meagre amount of Rs 837.87p per month to the respondents.
5. As held by this Court in Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. (2005) 1 SCC 705, 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.
6. The learned counsel for the appellants submitted that the appellants cannot be held liable to pay anything more than the standard rent of the premises, in spite of the decree for eviction having been passed as the same is sub judice. This submission needs a summary dismissal in view of the judgment of this Court in Atma Ram Properties (P) Ltd. case (2005) 1 SCC 705. Both the parties have filed affidavit and counter-affidavit, placing on record material giving the Court an idea of the rate of rent generally prevalent in the locality where the suit property is situated. Canara Bank on the first floor of this building is paying rent @ Rs 25 per sq ft other than maintenance and municipal taxes. One Rumpa Ghosh entered as the tenant in the year 2002 is paying rent @ Rs 32 per sq ft. Taking an overall view of the material made available by the parties, we think that the appellants should, from the date of the decree of the eviction, pay mesne profits/compensation for use and occupation @ Rs 15 per sq ft subject to final determination of the same by a competent forum.
7. The application is disposed of in terms of the following directions:
(1) With effect from 12-3-2004, the date of the decree passed by the High Court, the appellants shall be liable to pay, or deposit for payment, to the respondent landlords, an amount calculated @ Rs 15 per sq ft for an area of 5678 sq ft, the area which according to the appellants is in their possession.
(2) The first such deposit shall be made on or before 30-6-2005 consisting of the amount calculated up to that date. The appellants may adjust, by way of deduction, the amount, if any, paid by them to the respondents for this period.
(3) With effect from 1-7-2005 the appellants shall continue to pay or deposit for payment to the respondent landlords, an amount calculated at the same rate month by month and by the 15th day of that month.
(4) The respondents are permitted to move an application under Order 20 Rule 12 of the Code of Civil Procedure or to pursue such remedy as may be available to them under the law for determination and recovery of the mesne profits which they would be entitled to recover from the appellants for the period between the date of institution of suit till the date of recovery of possession in the event of the appeal being dismissed.
(5) The respondents shall file an undertaking on affidavit, making a statement that the amount recovered by the respondents in terms of this order shall be refunded or remain available for adjustment in terms of any directions which this Court may make at the end. If any amount becomes liable to be refunded consistently with the decision of this Court in the appeal, the respondents shall refund the same, within the time appointed by the Court for the purpose and the amount shall remain a charge on the suit property.
(6) Non-compliance with any of the terms stated in paras (1) to (4) above shall result in the order of stay passed by this Court being vacated and the respondents shall be free to execute the decree and recover possession from the appellants. Similarly, non-compliance by the respondents with condition (5) stated hereinabove would disentitle them to receive the amount and the amount liable to be paid by the appellants shall be deposited in the Court and invested in fixed deposit from time to time.
8. We make it clear that the amount quantified by this Court in this order is only a tentative opinion formed by the Court on the basis of the material made available by the parties and is neither a determination of the actual amount for which the appellants may be held liable for payment to the respondents in duly constituted proceeding for the purpose nor is it intended to be a reflection on the merits of the case.
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