1 nms1576-10.sxw pps IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION Notice of Motion No. 1576 of 2010 in Suit No. 770 of 2006 Padmini Hiralal Jain & Anr. .. Plaintiffs v/s. Ashok Kumar Mishrilal Jain ..Defendant Mr.A.S.Khandeparkar i/b. D. Brijesh for the Plaintiffs in support of notice of motion. Mr.Mayur Khandeparkar i/b. K.D.Jha for the Defendant No.1. Ms.Neeta Solanki i/b. Kiran Jain & Co. for the Defendant Nos.2 to 8 CORAM : R.Y.GANOO, J. DATED : 7th December , 2010 P.C. : 1. During the pendency of this suit, defendant no.1 has been appointed as agent of the Court Receiver, pursuant to the Order dated 20.3.2007. While passing that order, defendant no.1 was directed to pay adhoc royalty at the rate of Rs.5000/- per month and the Court Receiver was directed to fix the final royalty amount after giving hearing to the plaintiffs and defendant no.1, being the parties who 2 nms1576-10.sxw were interested in knowing the figure to be fixed by the Court Receiver as final royalty. 2. I have heard learned Counsels on both sides. The Receiver has by his report dated 6.4.2010 fixed the final royalty at the rate of Rs. 7000/- per month for the period March 2007 upto August 2008. In or about end of August 2008, the shop premises i.e. Shop No.28 which is subject matter of this suit was taken over by the developer for redevelopment. Hence there was no question of any royalty being payable till the redevelopment was over so far as said Shop No.28 i.e. suit premises. Record indicates that after redevelopment totally new premises were handed over to the defendant no.1 in November 2009 as agent of the Court Receiver. That is how the Court Receiver was required to fix the royalty in regard to the suit premises i.e. newly developed premises for the period commencing from November 2009. The two relevant periods as mentioned aforesaid i.e. March 2007 to October 2008 i.e. period prior to development and November 2009 onwards i.e. period after development are acceptable to both the parties and there is no dispute about it. The Receiver has by his report fixed the rate of royalty at Rs.14,700/- for the period of 3 nms1576-10.sxw November 2009 after the defendant no.1 was inducted in the newly constructed shop premises. The area of the shop is about 19.22 sq. mts built up. There is no dispute about the area of said premises, as it was calculated as per the architect who was appointed by one of the party. The Court is required to hear the counsels for both sides on the question as to whether the Receiver has fixed the proper royalty for the two relevant periods as mentioned aforesaid as plaintiffs have raised dispute about said amounts fixed by Receiver. 3. My attention was drawn to page 30 of the plaint which is leave and license agreement entered into by plaintiffs in favour of defendant no. 1 in the year 2005 and the compensation amount fixed therein was Rs.5000/- per month. The said agreement was to come into effect from 01.02.2005. The Court was informed by the Counsel for defendant no.1 that this Leave and License was obtained by defendant no.1 and this compensation was fixed by consent of the plaintiffs. Counsel for the plaintiffs submitted that prior to 1.2.2005 the suit agreement was entered into and because defendant no.1 wanted some time to vacate this document of leave and license at the rate of Rs.5000/- was executed by way of a mere arrangement not to 4 nms1576-10.sxw be acted upon for all practical purposes. He therefore submitted that the returns from the premises prior to development cannot be fixed by relying upon this document of leave and license. 4. Rival contentions were raised before the Court on the question of ultimate royalty fixed. Arguments were advanced by counsel for plaintiffs to show as to how the exercise carried out by the Court Receiver was incorrect. Counsel for the plaintiffs had submitted that the basis of valuation and the final figure based on the said valuation is not the correct approach. As against that, Counsel for the defendant no.1 contended that the valuer has considered the value of the newly constructed premises and has arrived at the figure of Rs. 14,700/- by treating that if the sum of Rs.22 lakhs, being the value of the premises is invested in a nationalized bank, the return would be Rs.14,700/- at the rate of 8% per annum. Learned Counsel for the defendant no.1 justified the fixation of royalty at the rate of Rs. 14,700/- after the period of development. Counsel on both sides have informed the court that defendant no.1 is not in arrears of payment of royalty as of today. 5 nms1576-10.sxw 5. The question of fixation of royalty as mentioned earlier will have to be divided into two parts, period prior to development and period after development. So far as the period prior to development, the Receiver has fixed the royalty at the rate of Rs.7000/-. He has relied upon the figure fixed by the Court by way of adhoc royalty and he is impressed by the fact that the premises prior to redevelopment were old and dilapidated. Unfortunately, this leave and license agreement was not placed before him for consideration. I say so because there is no reference in the order which is passed by the Court Receiver. If one considers the text of leave and license agreement executed on 1.2.2005 it shows that monthly compensation fixed was Rs.5000/- . The royalty amount fixed for the year 2007 at Rs.7000/- is correctly fixed. The royalty can be determined by answering the question as to what amount the person who is entitled to enjoy the property would fetch if he, instead of enjoying the property for oneself gives it to some other person and gets some compensation from it. If in the year 2005 the compensation was fixed by the plaintiffs at Rs.5000/- per month, fixing of royalty at Rs.7000/- in the year 2007 is reasonable as some escalation is provided and the concept of rise in returns has been taken care of. Hence so far as the fixation of 6 nms1576-10.sxw royalty at the rate of Rs.5000/- per month for the period March 2007 to August 2008 will have to be treated as proper exercise done by the Court Receiver. 6. So far as the period November 2009 onwards, the situation at the site has changed in as much as defendant no.1 has started occupying the newly constructed premises with certain amenities which I am sure must have been installed at the site taking into consideration the fact that the premises are newly constructed. The Receiver has taken into consideration the valuation report. By the said report the value of the shop is fixed at Rs.22 lakhs and the said valuation ofcourse is based on reckoner value, namely Rs.1,15,000/- per sq. meter. The valuer has taken into consideration the fact that if the sum of Rs.22 lakhs are invested at the rate of 8% per annum, the interest receivable would be Rs.14,700/- and the Receiver has considered this exercise as proper and fixed the royalty at the rate of Rs.14,700/-. I do not agree with this method. When a person comes into possession of the business premises, and that too a newly constructed premises, and if he decides to give it to somebody on leave and license or on conducting basis, surely the return would be definitely more that 8% 7 nms1576-10.sxw per annum on the value. Infact, there would not be any relation between the actual value of the premises i.e. the reckoner value of the premises and the returns. Returns will depend upon the site where the premises are situated, whether the premises are on the ground floor, whether the premises can be officially used for business purpose and actual amenities which are provided for the purpose of enjoying those business premises. Nothing has been considered by the Receiver in this behalf, possibly because no material was placed before him in that behalf by any of the sides. If the plaintiffs are interested in getting the maximum amount of royalty from this business premises, the responsibility was on the plaintiffs to bring adequate evidence. That has not been done. Same ofcourse, has not been done by the defendants to show the reasonable figure which can be fetched by giving the premises to somebody else on leave and license basis or on conducting basis. In my view, if the material so as to ascertain as to what amount would be fetched by giving the premises on leave and license basis/conducting basis is collected and placed before the Receiver, then the Receiver would be able to fix the proper amount of royalty. It is for this reason, I am inclined to observe that the fixing of royalty at the rate of Rs.14,700/- was not 8 nms1576-10.sxw proper. If the aforesaid exercise is carried out royalty could be more or could be less depending upon the material placed before Receiver. Hence, I am now inclined to direct the Receiver to conduct the exercise of fixing of royalty afresh for the period November 2009 onwards. The Receiver will give opportunity to both the sides to place material before him to show as to what amount can be fetched by allowing this premises to be enjoyed by a third party on leave and license basis and /or conducting basis. Once the necessary material is placed before the court by plaintiffs and/or by defendant no.1 or by both the sides, Receiver can consider that material and then arrive at the royalty amount for the period November 2009 onwards. The Receiver shall give hearing to both the sides before passing any order. 7. Needless to mention that till such time, the Receiver fixes the new figure of royalty for the period November 2009 onwards, Defendant no.1 shall continue to deposit the royalty at the rate of Rs.14,700/- per month. 8. For the reasons mentioned aforesaid, the following order is passed to 9 nms1576-10.sxw dispose of this motion. ORDER i. Royalty amount fixed at the rate of Rs.7000/- per month for the period March 2007 to August 2008 is confirmed. ii. So far as the period commencing from November 2009, Receiver shall provide opportunity to both the sides to produce appropriate material before the Court Receiver to ascertain as to what amount can be fetched by way of compensation, if the premises are given on leave and license basis or on conducting basis. After the parties place the relevant material before him, he would provide them personal hearing and arrive at royalty being final royalty based on the material placed before him. Receiver shall pass a speaking order fixing the royalty. Till such time this exercise is carried out, defendant no.1 shall continue to pay the royalty at Rs.14,700/- per month for the period November 2009 onwards. There shall be no order as to costs. iii. Parties are directed to place the respective material before the 10 nms1576-10.sxw Court Receiver as expeditiously as possible and the Receiver shall complete this job by 31.3.2011. iv. Needless to mention that whatever is stated in this order was for the purpose of deciding this motion. Receiver shall not get influenced by this. v. Notice of Motion is disposed of in above terms with no order as to costs. [R.Y.GANOO, J.]