AO/297/2005 1/46 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD APPEAL FROM ORDER No. 297 of 2005 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= LAXMICHAND BHAGAJI LTD. THRO' LAXMICHAND BHAGAJI DEPOSITORS - Appellant(s) Versus MADHUBHAI MANISHANKAR DESAI - Respondent(s) ========================================================= Appearance : MR DIPEN C SHAH for Appellant(s) : 1, MR SUNIT S SHAH with NV GANDHI for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE K.A.PUJ Date : 21/02/2008 ORAL JUDGMENT 1. The appellant – original plaintiff has filed this Appeal under Order 43 Rule 1 of AO/297/2005 2/46 JUDGMENT Civil Procedure Code, challenging the judgment and order dated 7.4.2005 passed by the learned Civil Judge (S.D.) Bardoli below an application Ex.5 in Special Civil Suit No.66 of 2003 whereby the application Ex.5 was rejected. The Appeal From Order has come up for hearing on 23.8.2005. This Court has observed that since the appellant proposed to file Civil Application for interim relief, the hearing of Appeal was adjourned to 26.8.2005. In the meantime, the appellant has filed Civil Application No.7646 of 2005. This Court has admitted the Appeal On 26.8.2005 and notice was issued in Civil Application making it returnable on 12.9.2005. However, the Civil Application No.7647 of 2005 was disposed of by this Court on 18.1.2006 and it was observed therein that allowing this application would tantamount to allowing the Appeal, and therefore, it cannot be entertained. The appellant has filed Civil Application No.3396 of 2007 for fixing AO/297/2005 3/46 JUDGMENT the date of hearing. The said application was disposed of by the Court vide its order dated 5.3.2007 and Appeal From Order was fixed for hearing on 4.4.2007. 2. The hearing of Appeal was thereafter adjourned from time to time and ultimately it was effectively heard for the first time on 17.1.2008 and it was observed therein that the Court is of the prima facie view that at this stage, the order regarding handing over possession cannot straightway be passed. However, the present respondent has been enjoying the property since 1991 and he has not paid a single pie towards rent or occupation charges. The present appellant – original plaintiff has in the injunction application only asked for direction to the respondent – original defendant to deposit a sum of Rs.2,500/- with the Court from the date of the Suit. The Court was, therefore, of the prima facie view that the said prayer AO/297/2005 4/46 JUDGMENT could not be said to be unreasonable or improper. Before any direction was issued while finally disposing of the Appeal From Order, Mr. N.V.Gandhi, learned advocate appearing for the respondent prayed for some time to take necessary instructions from the respondent – original plaintiff and hence the matter was adjourned to 24.1.2008 for final disposal. On 24.1.2008, Mr.Gandhi was not present. However, Mr.Amit Chaudhary, learned advocate appearing for Mr.Sunit Shah, learned advocate for the appellant has submitted that Mr.Sunit Shah is appearing in this matter and since he was out of station time was sought for. The Court, therefore, observed that as a matter of fact the matter was adjourned to seek instruction from the client, however no such instruction has come forward. The matter was, thereafter, adjourned to 25.1.2008. On 25.1.2008, Mr.Sunit Shah, learned advocate appearing for Mr. N.V.Gandhi submitted that he wanted to argue the Appeal AO/297/2005 5/46 JUDGMENT at length and hence he sought permission to make his submission. Before granting such permission, the Court has asked the respondent to deposit a sum of Rs.25,000/- before this Court towards an arrears of rent. Mr.Shah, under the instruction of the respondent, agreed to deposit the said amount on or before 30.1.2008 and matter was adjourned to 30.1.2008 on this condition. The matter was, thereafter, heard at length. 3. It is the case of the appellant – original plaintiff that Laxmichand Bhagaji Ltd., Company incorporated under the Companies Act, 1956, was wound up and committee was constituted under the order of Bombay High Court in Company Petition No.76 of 1991 for compromise and arrangement and the said committee came to be known as Laxmichand Bhagaji Depositors Management Committee. The said Committee is authorised to sell and recover sale proceeds by selling the property AO/297/2005 6/46 JUDGMENT of the Company in liquidation anywhere in India pursuant to the Scheme of Compromise and Arrangement sanctioned by Bombay High Court in Company Petition No.76 of 1991. The property bearing City Survey No.4232 and registered in Nagarpalika at 2/1128 is the property of the Company in liquidation. The respondent – original defendant was the employee of the Company in liquidation and the said property was given to him for residential use during the period of service. Since the Company was wound up, the contract of employment with the respondent had come to an end and the respondent has been unauthorisedly occupying the said premises since 28.11.1991. A Notice was also issued to the respondent to vacate the premises and the respondent has wrongfully retained the possession of the premises even after the receipt of the notice. It is, therefore, contended that the respondent is not the tenant of the Company in liquidation and no AO/297/2005 7/46 JUDGMENT document like rent receipt etc., is produced by the respondent. 4.The appellant, therefore, filed Special Civil Suit No.66 of 2003 before the learned Civil Judge (S.D.), Bardoli, praying for handing over the possession of the property bearing City Survey No.4232 and having its Registration No.2/1128 in the record of Bardoli Nagarpalika on the ground that the respondent is in unauthorised and illegal possession of the said property. The appellant has also prayed for recovery of rent of Rs.90,000/- for the last 3 years alongwith the interest at the rate of 18% per annum. The appellant has further prayed for Rs.2,500/- p.m. for use and occupation and loss of rent during the pendency of the suit. The appellant has also filed an application Ex.5 seeking interim relief under Order 39 Rule 1 and 2 read with Section 151 of Civil Procedure Code praying for the direction to AO/297/2005 8/46 JUDGMENT the respondent to deposit the sum of Rs.2,500/- p.m. in the court for use and occupation as well as loss of rent during the pendency and final disposal of the suit. This injunction application was rejected by the learned Civil Judge (S.D.) Bardoli, vide his order dated 7.4.2005 and it is this order which is under challenge in the present Appeal From Order. 5. Mr.Dipen C. Shah, learned advocate appearing for the appellant has submitted that the order passed by the learned Civil Judge is ex-facie, erroneous and contrary to law and facts of the appellant's case. It is wholly based on misconception of law and it suffers from the vice of failure to appreciate evidence on record. He has submitted that the respondent was never the tenant of the Company in liquidation. He was merely an employee of the Company and after the winding up of the Company the contract of employment AO/297/2005 9/46 JUDGMENT has ceased to exist and the respondent is no longer the employee of the Company. He has further submitted that the minutes of the meeting dated 17.10.1997 of the Management Committee appointed by the Bombay High Court clearly indicates that the property in question at Bardoli is property of the Company in liquidation. The said minutes clearly reveals that the respondent was the employee of the Company and not the tenant. The minutes further reveals that there is conclusive proof to establish that the property in question is the property of the Company and not the partnership property. He has further submitted that Clause 17 of the Compromise Scheme framed by the Bombay High Court, in no uncertain terms, states that selling of the property of the Company in liquidation shall be given priority to all other claims and all suits which come in the way of depositors receiving their amount out of the sale proceeds shall stand stayed. He AO/297/2005 10/46 JUDGMENT has further submitted that the prayers made in para-14 of the suit as well as para-9 of the application are not the same and hence the injunction application cannot be rejected on that ground. The learned Civil Judge has also committed an error in law while holding that the appellant is not entitled to a reasonable sum from the respondent towards use and occupation of the premises of the appellant. He has further submitted that all the power of attorneys have been cancelled by public advertisement dated 13.12.1990 and hence any transaction based on such power of attorney is void ab initio. He has further submitted that there is no dispute about the fact that the respondent was the employee of the Company in liquidation and the first floor of the said premises at City Survey No.4232 at Bardoli was given to the respondent for residential purpose under the contract of employment. The respondent was given the permissive use of the said premises AO/297/2005 11/46 JUDGMENT at Bardoli in the capacity of he being the Manager of the Company in liquidation. He has further submitted that the learned Civil Judge has committed a grave error of law and failed to consider that right of tenant to continue in possession comes to an end on determination of lease under Section 111 of Transfer of Property Act and for any occupation of the premises thereafter he becomes liable to pay damages at the rate at which the landlord could have let out the premises on being vacated by lease. 6. In support of his submission Mr.Shah has relied on various judgments of High Courts as well as of Hon'ble Supreme Court. He relied on all these judgments for canvassing different propositions such as prima facie case, appellant's right to claim mesne profit and/or damages keeping in mind the provisions contained in Order 20 Rule 12 of Civil Procedure Code, measurement of damages, AO/297/2005 12/46 JUDGMENT guiding principle for claim of increasing rent and claiming possession of property on the ground of failure of payment of reasonable rent by tenant at sufferance and unauthorised occupant on termination of the lease agreement. 7. As far as scope of Order 29 Rule 1 and 2 vis-a-vis Section 94 of the Civil Procedure Code is concerned, Mr.Shah has relied on the decision of Hon'ble Supreme Court in the case of Manohar Lal Chopra vs. Rai Bahadur Rao Raja Seth Hiralal, reported in AIR 1962 SC 527, wherein it is held that the provisions of the Code are not exhaustive, for the simple reason that the Legislature is incapable of contemplating all the possible circumstances which may arise in future litigation and consequently for providing the procedure for them. The effect of the expression 'if it is so prescribed' in S. 94 is only this that when the rules in O. 39, AO/297/2005 13/46 JUDGMENT Civil P. C., prescribe the circumstances in which the temporary injunction can be issued, ordinarily the Court is not to use its inherent powers to make the necessary orders in the interests of justice, but is merely to see whether the circumstances of the case bring it within the prescribed rule. If the provisions of S. 94 were not there in the Code, the Court could still issue temporary injunctions, but it could do that in the exercise of its inherent jurisdiction. It is in the incidence of the exercise of the power of the Court to issue temporary injunction that the provisions of S. 94 of the code have their effect and not in taking away the right of the Court to exercise its inherent power. The Court further held that Section 151 itself says that nothing in the Code shall be deemed to limit or otherwise affect the inherent power of the Court to make orders necessary for the ends of justice. In the face of such a clear statement, it is not AO/297/2005 14/46 JUDGMENT possible to hold that the provisions of the Code control the inherent power by limiting it or otherwise affecting it. The inherent power has not been conferred upon the Court; it is a power inherent in the Court by virtue of its duty to do justice between the parties before it. Further, when the Code itself recognizes the existence of the inherent power of the Court, there is no question of implying any powers outside the limits of the Code. Thus, there being no such expression in S. 94 which expressly prohibits the issue of a temporary injunction in circumstances not covered by Order 39 or by any rules made under the Code, the Courts have inherent jurisdiction to issue temporary injunction in circumstances which are not covered by the provisions of order 39, C. P. C., if the Court is of opinion that the interests of justice require the issue of such interim injunction AO/297/2005 15/46 JUDGMENT 8. Mr. Shah has submitted that even during the pendency of the suit the appellant can claim the relief with regard to reasonable rent or mesne profit and provision of Order 20 Rule 12 would not come in its way. For this purpose he relied on the decision of the Hon'ble Supreme Court in the case of Girdharilal (dead) by Lrs. vs. Hukum Singh and others, reported in AIR 1977 SC 129, wherein High Court had overruled the objection that a decree for rent for mesne profits during the pendency of the suit could not be granted under Order 20, Rule 12 of Civil Procedure Code. The defendant had himself pleaded before the Court that the suit was for ejectment on which the additional Court-fee had to be paid. The High court pointed out that the plaintiff had paid the additional Court-fee for a suit for ejectment. Hence, it held that it was not open to the defendant to object to the award of mesne profits on the ground that there was AO/297/2005 16/46 JUDGMENT not suit for ejectment before the Court. This was quite a frivolous objection. In the present case, the appellant has filed suit of ejectment and also for mesne profit. The appellant has paid the proper Court fee and hence any objection to this effect is quite frivolous. 9. As far as rules governing for measurement of damages are concerned, Mr.Shah has relied on the decision of Madras High Court in the case of Union of India vs. Andhra Bank Ltd., reported in AIR 1976 Madras 387, wherein it is held that a tenant continuing in possession of the demised premises after the determination of a lease is called a tenant at sufferance. If such possession is attributable to the consent of the landlord given either expressly or by necessary implication, then he is called a tenant holding over or a tenant at will. But if in a given situation, such consent is not proved, AO/297/2005 17/46 JUDGMENT then he is called a tenant by sufferance. But in no case he can be characterised as a trespasser. If a tenant at sufferance continues to occupy the premises after the determination of the lease, then he cannot unjustly enrich himself by claiming that he will pay only the quondam rent and not reasonable rate of damages for use and occupation of the premises. If he assents to pay the enhanced rent demanded at a time when the landlord determines the lease, then he will be considered as a tenant holding over on the basis of new contract of lease as between himself and the landlord. If the tenant, in spite of the warning, contumaciously remains in possession of the premises, the landlord secures a right to get a reasonable compensation from the tenant for such occupation, but it need not necessarily be the enhanced rate of rent claimed by him; but in no circumstances, it can exceed the enhanced rate demanded by him. The Court AO/297/2005 18/46 JUDGMENT further held that the Court should investigate and it has the jurisdiction to do so, and find in its discretion whether the enhanced rate claimed by the landlord, in such circumstances is penal or otherwise equitably justified. The Court has power and the discretion to fix a fair and equitable rent in such situations. 10. Mr.Shah further relied on the decision of the Hon'ble Supreme Court in the case of Roop Kumar vs. Mohan Thedani, reported in AIR 2003 SC 2418, for the proposition that when a person is in unauthorised occupation of premises what would be the amount of damages. In this context, the Hon'ble Supreme Court in para-32 observed that One plea which is urged with some amount of emphasis was increase of the damages from Rs. 500/- p.m. to Rs. 1200/- p.m. As noted supra, with the consent of the parties, the High Court had exercised powers under Order 41, Rules 30, 32 and 33. It took AO/297/2005 19/46 JUDGMENT note of the ground realities which were not disputed before the Court. High Court recorded a positive finding that in the normal course the appellant would have paid at least Rs.1200/- p.m., though the amount payable was more than, even for the period for which accounts were rendered or were to be rendered. It was fairly accepted by learned counsel for the appellant before is that the rentals in the area have increased by leaps and bounds after 1980. That being so, the specious plea that there was no scope for enhancement of the quantum of damages fixed by the Trial Court is indefensible. Judged from any angle, the appeal is devoid of merit and deserves dismissal with cost. 11. Mr. Shah further relied on the decision of the Bombay High Court in the case of Kesardeo Barjnath vs. Nathmal Kisanlal, reported in AIR 1966 Bombay 266, wherein while lying down the criteria for ascertainment of mesne AO/297/2005 20/46 JUDGMENT profit the Court held that criterion is not what plaintiff might have got had he been in possession but value of user of tenement in defendant after termination of tenancy. The Court further held that Protection of Rent Control Order is not available to erstwhile tenant. Considering all these issues in the context of unavailability of houses on rent, value or user of tenement to defendant would necessarily be much more than what defendant paid as rent. 12. Mr. Shah further relied on the decision of Patna High Court in the case of Ram Kishun Lal and others vs. Abu Abdullah Syed Hussain Imam, reported in AIR (30) 1943 Patna 69, wherein it is held that under the definition of “mesne profits” in S.2(12) the sum to be awarded is not what the plaintiff has lost by his exclusion from the land, but what the defendant has made or might with reasonable diligence have made by his wrongful AO/297/2005 21/46 JUDGMENT possession. The Court further held that although under S.106, Evidence Act, the burden of proving the amount of mesne profits actually received is on the person receiving them but as regards the amount of profits that might with ordinary diligence have been received by the person in occupation, the burden of proving is on the person claiming it. 13. Mr.Shah further relied on the decision of Bombay High Court in the case of Ratilal Thakordas Tamkhuwala vs. Vithaldas Magandas Gujarathi, reported in AIR 1985 Bombay 134, wherein it is held that The law with regard to mesne profits would not admit the consideration of only the standard rent fixed under the Rent Act as the measure of such profits. In fact, there would be no question of rent being earned by the person in wrongful possession, nor would the statutory quantification of rent by the Rent Act AO/297/2005 22/46 JUDGMENT governs his liability. At the most and at the maximum, the rent so fixed by the Rent Act could be treated as merely a relevant piece of evidence so as to find out what the person could have, reasonably and with due diligence, had the property been let, earned and nothing more. It is the value of the wrongful possession that is the point of reference for the purpose of deciding the quantum of mesne profits. Rent could be a relevant factor for considering such a value but not decisive of the matter. The standard rent, as the law indicates, has different point of reference statutorily fixed and is not indicative of the value of the possession at the date when such possession becomes wrongful. The possession of a judgment-debtor becomes wrongful upon the passing of the eviction decree, while the provisions like those of the Rent Act have a different point of reference with regard to lawful possession. AO/297/2005 23/46 JUDGMENT 14. Mr. Shah further relied on the decision of Allahbad High Court in the case of Soha Lal vs. Amba Prasad, reported in AIR 1922 Allahbad 526, wherein it is held that damages for trespass are at large but at least the plaintiff is entitled in every case to nominal damages. If a defendant makes a bonafide mistake, a Court ought to be content to award nominal damages but if a defendant takes a risk which he knows to be a risk and persists in fighting when he knows or ought to know that he is wrong, his conduct ought to be measured in some way by the special damages which the Court is entitled to award. The measure of damages in contract is quite different to that in tort. In contract the plaintiff can only recover the actual pecuniary loss. In tort he is entitled to special damages for trespass to property. 15. Mr. Shah further relied on the decision of AO/297/2005 24/46 JUDGMENT Madhya Pradesh High Court in the case of Basodi alias Munshilal vs. Smt. Meera Bai, reported in AIR 2006 Madhya Pradesh 179, wherein after relying on the judgment of Supreme Court in the matter of Marshall Sons & Co., (I) Ltd., vs. Sahi Oretrans (P) Ltd., reported in (1999) 2 SCC 325, the Apex Court has awarded the mesne profit on higher rate at appellate stage, it is held that in view of this settled law, the appellate Court is within jurisdiction in awarding the mesne profit on higher rate. The Court further held that Courts have vested powers to award the mesne profit at the market rate for the period pendente lite of the suit and till recovery of possession of property but by supplying the sufficient reasons in the judgment or orders. 16. Mr. Shah further relied on the decision of Court of Appeal in the case of Swordheath Properties Ltd., vs. Tabet, reported in 1979 AO/297/2005 25/46 JUDGMENT Weekly Law Reports 285. In this case the plaintiffs let residential premises at a rent payable monthly in advance at a rate of Pound 1,040 per annum to the first defendant for a fixed term of three months. Before that fixed term expired the first defendant left the premises leaving the second and fifth defendants in occupation. The plaintiffs brought an action against all the defendants claiming possession of the premises and against the second, third, fourth and fifth defendants damages for trespass from the date when the first defendant's entitlement to remain in the premises terminated until possession at the rate of Pound 1,040 per annum. At the hearing of the action in January 1978, the judge granted the plaintiffs an order for possession but refused their claim for damages on the ground that no evidence had been adduced that the plaintiffs could or would have been able to let the premises to a suitable tenant during AO/297/2005 26/46 JUDGMENT the period