1 16.cac124.11 ast IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION CIVIL APPLICATION NO. 124 OF 2011 IN CIVIL REVISION APPLICATION NO. 6 OF 2011 M/s. Maharani Prints. ....Applicant Vs. M/s. Bhaktawar Construction Co. (P) Ltd. ....Respondent. Mr.S.G. Deshmukh i/b. Mr. Ramdas Shelke, Advocate for Applicant. Mr. Vineet Naik a/w. Preeti Ramani a/w. H. Kadaiani a/w. M. Kachwalla i/b. ALMT Legal, Advocate for Respondent. CORAM:- GIRISH GODBOLE, J DATED:- SEPTEMBER 7, 2011 P.C. 1. Heard Mr. S.G.Deshmukh, Advocate for Applicant/original Applicant in CRA and Mr. Vineet Naik, Advocate for the Respondent. 2. Rule. Rule made returnable forthwith. Since pleadings are complete, heard by consent of the parties. 3. Respondent is landlord who had filed R.A.E. & R. Suit No. 206/711 2 16.cac124.11 of 1984 in the Court of Small Causes at Mumbai against the Applicant for possession of the Suit Premises on various grounds, namely, default, breach of terms of tenancy, carrying out additions and alterations, making waste and damages etc. The Suit Premises are admeasuring 7317 sq. ft. on the first floor of the building in the property known as Meher Tiles Compound, Jogeshwari (E), Mumbai -400 060. The Defendant (Applicant) is a partnership firm carrying on business. The other tenements in the building and other buildings are occupied by tenants save and except one premises on the ground floor which have been given on leave and licence. The Learned Judge of the Trial Court dismissed the Suit on 22nd December, 2006. The Appeal No. 122 of 2007 filed by the Respondent (Plaintiff) has been allowed by the Appellate Bench of the Court of Small Causes by impugned Judgment and Decree dated 8/10/2010 and decree for eviction has been passed only on the ground of default. All the other grounds have been negatived. Aggrieved by the said order, the Applicant/Defendant has filed a Revision Application which is admitted by order dated 10/1/2011 and a separate Application ws directed to be filed for stay which is accordingly filed. 3. In terms of the law laid down by the Supreme Court of India in the 3 16.cac124.11 case of Atma ram Properties (P) Ltd. v/s. Federal Motors (P) Ltd. (2005) 1 SCC 705, as also the subsequent Judgment of the Supreme Court of India of 3 Judges in the case of State of Maharashtra & Anr. v/s. Super Max International Private Limited & ors. (2009) 9 SCC 772, the question of reasonable rate of compensation as a condition for grant of stay of the Decree for eviction on the principals on the principles similar to Order 41 Rule 5 of the Code of Civil Procedure will have to be considered. It is settled that the compensation can be fixed only from the date of the Decree of eviction which in this case is 8/10/2010. In this context the Civil Application has to be considered. 4. Mr. Deshmukh, the learned Counsel for the Applicant firstly relied upon the Order dated 22/12/2006 passed by the Court of Small Causes in R.A.N. Application No. 485/SR of 1982 and contends that since the standard rent exclusive of permitted increase is already fixed at Rs. 3004.75ps; and even with permitted increases, the amount would come to Rs. 3077.75ps. per month, that should be the maximum amount which should be fixed as monthly compensation. It is alternatively submitted by Mr. Deshmukh that relying on the avernments in the Civil Application and the Affidavit In Rejoinder filed by the Applicant that the southern 4 16.cac124.11 most portion of the suit building on the first floor, where suit premises are situated, have been constructed before the 60 years and thereafter rest of the building is constructed step by step. Relying on the avernments in the said rejoinder it is submitted that the landlord is consistently being careless and negligent in carrying out the repairs, which is the statutory obligations of the landlords and even the notice dated 22/8/2006 was issued by the MCGM under section 354 of the M.M.C. Act, 1888 on 3/11/2006. The photographs annexed with the affidavit in rejoinder as also a series of letters written by the Applicants to the Respondents calling upon the Respondent to carry out repairs have been relied upon to contend that on account of the failure of the landlord to comply with its statutory obligation, the Applicant was ultimately required to carry out repairs at its own costs. 5. Mr. Deshmukh also relied upon several documents annexed to the affidavit in rejoinder indicating that from time to time, the Applicant has carried out the work of internal repairs and/or water proofing. It is further submitted that the earlier business of printing cloths by screen printing was substantially reduced on account of imposition of excise duty of the Central Government from the year 1985-86 and hence work of 5 16.cac124.11 screen printing is carried out only with the help of contract labourers. According to the Applicant, the Applicant firm earns net profit of around Rs. 3 Lakhs per annum and hence amount of Rs. 3,077/- which is the standard rent including permitted increase should be the fair compensation. It is also argued that if any exorbitant amount is fixed, the Applicant will not be in a position to run the business at all and not only the partners, but the workers employed by the Applicant, who are poor, would also be deprived of their income. 6. On the other hand, Mr. Naik, the learned Counsel for the Respondents submits that the building is not 60 years old as alleged by the Applicant but is 50 years old. It is further submitted that since the Applicant has suffered Decree for eviction, while determining the compensation the income which the Respondent is getting from giving another premises in the property known as Meher Tiles Compound which indicates monthly licence fee of about Rs. 50/- per sq. ft. must be considered to be a correct bench mark. For this purpose reliance is placed on the affidavit in reply filed by the Respondents and the registered leave and licence agreement dated 8/12/2010 executed by the Respondent herein as licensor and a firm known as Irony Clothings Private Ltd. as 6 16.cac124.11 Licencee. Mr. Naik, Advocate for the Respondent submits that there, in respect of the premises admeasuring 1500 sq. ft. on the ground floor of the Industrial building known as Meher Tiles Compound a monthly licence fee of Rs. 75,000/- had been fixed and hence the same compensation should be fixed. Reliance is also placed on the report dated 17/12/2010 submitted by a firm of Architects and Surveyors appointed by the Respondents which has drawn a conclusion that the interim mesne profit would worth about Rs. 2,88,000/- per month. In so far as the submission regarding dilapidated condition of the suit premises is concerned, Mr. Naik submits that the grievance about their suit premises being dilapidated is being made only after the Decree for eviction is passed and the possibility of paying compensation more than the standard rent has arisen. It is further submitted that the Respondent had always been ready to carry out repairs but because of the non-cooperation of the Applicant, the repairs could not be carried out. It is further submitted that the repairs are in fact been carried out to some extent in the year 2006-2007. Mr. Naik submits that the audited balance sheets of the Applicant are not trustworthy, though audited, because substantial amounts have been shown as personal drawing of the partners and if the said amounts are taken into consideration, the theory of the Applicant that their net profit is 7 16.cac124.11 only about Rs. 3 Lakhs per annum will be falsified. 7. In Rejoinder Mr. Deshmukh submits that valuation report relied upon by the Applicant cannot be accepted. Some criticism about the manner in which the said valuation report has been written is also made by contending that the person writing the valuation report has virtually written the report as if it is an order passed by a Judicial Authority. 8. I have carefully considered the rival submissions. It is no doubt true that tenant having suffered a decree for eviction, will have to deposit reasonable and fair compensation with effect from 8/10/2010 which is the date of the Decree. The tenancy stood terminated by the said Decree. While putting the unsuccessful tenant to such terms, it is also necessary to bear in mind that the amount to be fixed by the Appellate Court/High Court should be such that it would not be onerous for a tenant and would not create a situation where the tenant is completely thrown out of his premises whether residential or commercial or industrial. In that context, various factors namely, the area, nature of construction of the building, the nature of the activity being carried on, financial capacity of the tenant, probable financial loss likely to be caused to the landlord are all factors 8 16.cac124.11 which are required to be considered. 9. The first submission of Mr. Deshmukh that the compensation should be fixed only at the standard rent plus permitted increase, cannot be accepted in view of the law laid down by the Supreme Court in the case of Atma Ram Properties (Supra). Once decree for eviction is passed tenancy comes to an end and hence, the standard rent cannot be the correct parameter for fixing compensation. 10. In the present case, the premises are situated in a suburb of Mumbai and cannot be said to be situated in the main business district or business center of Mumbai. It is admitted position that the premises are industrial premises. The activity of the Applicant firm is an industrial activity being carried on for several years. The area of the premises is 7317 sq. ft. The fact that the Applicant, during the pendency of the suit, had repeatedly called upon the Respondents to carry out repairs is duly established. The further fact that the Applicant had carried out work of repairs and water proofing at its own cost has also been duly established. The veracity or genuineness of the photographs of the portion of the suit premises which are annexed at pages 39 to 43 of the Affidavit-In- 9 16.cac124.11 Rejoinder of the Applicant is not disputed. The fact that even the Local Authority was required to issue a notice to the Respondent -landlord under Section 354 of the M. M. C. Act, 1888 is also not disputed. According to the Respondent, on account of non-cooperation of the Applicant repairs could not be carried out. Except such bare statement in the affidavit in sur-rejoinder, no material is placed on record. It must be stated in all fairness to Mr. Naik that he tried to rely upon the letter dated 3/11/2006 addressed to the Applicant. Perusal of the said letter however shows that the same was pursuant to the notice issued by the MCGM referred to above. No other material is placed on record to indicate that the repairs could not be carried out on account of the objections/obstructions of the Applicant. 11. Reliance placed on the Leave and Licence Agreement executed by the Respondent to buttress the submission that the compensation must be fixed atleast at Rs. 50/- per sq. fit. per month cannot also be accepted. In the first place, the said document is executed after passing of the Decree for eviction by the Appellate Court. The Applicant has specifically contended that the southern most portion of the building on the first floor where the suit premises is situated is more than 60 years old and 10 16.cac124.11 thereafter, rest of the building was constructed. In the Affidavit-In- Surrejoinder which is filed by the Respondent, in paragraph-6, above statement of the Applicant regarding progressive construction of portions of various building in the property known as Meher Tiles Compound is not disputed and what is stated is that the premises are not 60 years old, but are only 50 years old. It is thus clear that the Leave and Licence Agreement, which is executed in respect of the ground floor premises, cannot be taken up as bench mark for determining compensation. 12. In so far as the nature of business being conducted by the Applicant in the suit premises is concerned, there is no serious dispute. Correctness of the audited accounts produced by the Applicants is however, disputed by contending that substantial amounts have been withdrawn by the partners towards their personal drawings and that a sum of Rs. 4 Lakhs and odd has been lying as unsecured loan to the Family Members of the partners. Mr. Naik has drawn my attention to the audited balance sheet and from the balance sheet for the year ended 31st March, 2008, it appears that apart from the net profit after tax of about Rs. 3 Lakhs, another sum of approximately Rs. 3 Lakhs is shown to have been drawn by the partners towards their personal drawings, LIC premium and Medi-claim premium. 11 16.cac124.11 The figures of profit and the drawings vary for the subsequent years. Accepting all the objections about the audited balance-sheet and adding all the drawings of the partners to the net profit of the firm, the net profit will not exceed Rs. 6 Lakhs per annum. 13. The valuation report relied upon by the Respondent apparently does not seem to have been prepared on the basis of any inspection of the suit premises. The valuation report is based on the ready reckoner for all constructed premises as indicated in the ready reckoner prepared for the purpose of stamp duty. The return of 10% per annum is considered. Prima facie, valuation report does not seem to have taken into consideration the fact that even according to the ready reckoner substantial discounts are contemplated in respect of the old buildings or buildings which are in dilapidated condition. The report of the valuation, of which only paragraphs-16 and 17 are of some relevance, suggests that the compensation should be Rs. 2,88,000/- per month. In view of such report and in view of the fact that the report does not take into consideration age of the building and prima facie mechanically adopts the rate indicated in the ready reckoner for residential and commercial construction, as also for industrial building without considering the actual 12 16.cac124.11 nature of construction and the actual business being carried out in the suit premises and without inspection of the suit premises cannot be relied upon. 14. In view of the aforesaid discussion, it is now necessary to fix a fair and reasonable compensation for the suit premises admeasuring 7317 sq.ft. Considering the nature of business of the Applicant, the fact that the industrial activity is being carried on in the suit premises; considering audited balance sheet of the Applicant and even accepting the submission of Mr. Naik that the personal drawings of the partners need to be added, in my opinion, the annual net income which the Applicant gains can be assumed to be around Rs. 6 Lakhs, which will indicate that the monthly net profit of the Applicant would be in the range of 50,000/-. It would be unjust to fix the compensation at a rate more than the monthly income of the Applicant. Further the entire monthly income of the Applicant cannot be wiped out only towards deposit of compensation. 15. In my opinion, therefore a sum of Rs. 40,000/- per month, which will be inclusive of Rs. 3077/- per month which was fixed earlier as standard rent would be fair, just and reasonable compensation. Some 13 16.cac124.11 reasonable time will have to be given to the Applicant for depositing the arrears from 9/10/2010 till August, 2011. Arrears will have to be deposited in 3 equal monthly installments on or before 31st December, 2011. Monthly compensation commencing from the month of September, 2011 will have to be deposited on or before 15th of every month. For the month of September, 2011 deposit can be made till 15/10/2011 considering the time which will be taken for making copy of this order available to the parties. As and when the amounts are deposited in this Court, the same will have to be invested any nationalised bank till disposal of the Revision Application. Hence I pass following order : 16. Rule is made absolute in terms of prayer clause (a) subject to the following conditions : (a) The Applicant shall deposit monthly compensation fixed at the rate of Rs. 40,000/- with effect from 9/10/2010 till disposal of the Revision Application in this court. Said compensation will be inclusive of the amount earlier fixed by the Small Causes Court as standard rent and permitted increase. The arrears till 30/8/2011 shall be deposited in 3 equal installments commencing from October, 2011 till December, 2011. 14 16.cac124.11 First installment to be deposited on or before 31st October, 2011, 2nd on or before 30th November, 2011 and 3rd on or before 31st December, 2011. Compensation for the month of September, 2011 to be deposited on or before 15th October, 2011. Compensation for the months commencing from October, 2011 shall deposited on or before 15th day of every month. (b) All the partners of the Applicant firm shall file written undertaking in this court within 4 weeks that the Applicant will not part with possession of or create any third party rights or interests in respect of the suit premises. (c) As and when any amount as aforesaid is deposited, the Registrar Judicial is directed to invest every amount in the Nationalised Bank in Fixed Deposit earning maximum interest, which shall be automatically renewed till disposal of the Revision Application without any further orders being required to be passed in that behalf. (d) It is clarified that if the Respondent desires to carry out any repairs in the suit premises and for that purpose the Respondent wishes to utilize the part of the funds to be deposited by the 15 16.cac124.11 Applicant, liberty is granted to the Respondents to file an appropriate Civil Application for that relief, which will be considered on its own merits after considering the extent of repairs proposed to be carried on by the Respondent. Equally, such liberty will also be available to the Applicant to apply for withdrawal of the amount, if the Applicant desires to carry on repairs in its own premises. (e) In case of any default by the Applicant, the Respondent is free to apply to this Court for vacating interim relief. 17. Reliefs prayed in terms of prayer clause (b) and (c) in Civil Application is rejected in view of the aforesaid orders. Rule is made absolute in aforesaid terms with no order as to costs. (GIRISH GODBOLE, J)