1 CAW 665 of 2009 in WP 23 of 2006 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION CIVIL APPLICATION NO.665 OF 2009 IN WRIT PETITION NO. 23 OF 2006 Deepak Kundanlal Awatramani and Ors. ...Applicants/ Petitioners Vs. M/s.Gannon Dunkerley & Co. ...Respondents ----- Mr.P.S. Dani for Applicants Mr.Hiralal Thacker, Senior Counsel a/w.Mr. Jeetendra Ranawat i/b. M/s. Mahesh Jani and Co. for Respondents ----- CORAM: V.M. KANADE J. DATED: 6th April, 2011 P.C. 1. Heard the learned counsel appearing on behalf of the Applicants and the Respondents. 2. The Applicants herein are the original landlords and the Respondents are the original tenants. The landlords had filed the suit for eviction under section 41 of the Small Causes Court Act. The Trial Court decreed the suit and passed an order of eviction. This order was confirmed by the Lower Appellate Court and against this order, the Respondents filed the petition in this Court 2 CAW 665 of 2009 in WP 23 of 2006 being Writ Petition No.23 of 2006. This Writ Petition came up for admission before the Learned Single Judge of this Court, who was pleased to grant rule and the interim relief was granted in terms of prayer clause (b). Prayer clause (b) of the Writ Petition no.23 of 2006 reads as under. “(b) pending the hearing and final disposal of the Petition, this Hon'ble Court be pleased to stay the execution, operation and effect of the impugned judgment and decree dated 28.10.2005 and the Respondents be restrained by an Order of this Hon'ble Court from taking any steps in execution and/or implementing the same.” 3. The Applicants challenged this order by filing an SLP in the Apex Court. The Apex court did not interfere with the interim order passed by this Court. However, liberty was granted to the Applicants to make an application before this Court for either furnishing surety or fixing mesne profits. A further direction was given that if such application is made, it should be decided on its own merits. The Applicants also had filed an application 3 CAW 665 of 2009 in WP 23 of 2006 for fixing the mesne profits by filing an application under Order 20 Rule 12 in the Trial Court. The Respondents, however, opposed the said application and pointed out to the Court the interim order passed by this Court. The Trial Court, therefore, stayed the application filed by the Applicants for fixing of mesne profits. The Applicants have, therefore, filed this application. In the Civil Application, the Applicants have claiming the following reliefs: “(a) The Hon'ble Court may be pleased to direct the Respondent to pay mesne profit for 91 months from 1st June, 2000 to 31st January, 2009, and recurringly thereafter until the time the Applicants recover possession of the suit premises. (b) in the event of the Respondents failing to comply with the order which may be passed by this Hon'ble Court, the stay of the execution of the Decree passed in T.E. & R.Suit No.235/289 of 2000 be vacated and the Applicants may be permitted to execute the said Decree. (c) the hearing of the present Writ Petition be expedited and the same be heard and 4 CAW 665 of 2009 in WP 23 of 2006 decided expeditiously. (d) to pass such further and other Orders as to this Hon'ble Court may deem fit and proper. 4. The learned counsel appearing on behalf of the Applicants submitted that the premises in question is situated in a prime locality and is admeasuring 4675 sq.ft. Built up area. It is submitted that in view of the judgment of the Apex Court in the case of Atma Ram Properties (P) Ltd. vs. Federal Motors (P) Ltd. [(2005) 1 Supreme Court Cases 705], which was confirmed by the Three Judges' Bench of the Apex Court in the case of State of Maharashtra vs. Super Max International Pvt. Ltd. [AIR 2010 Supreme Court 722], this Court was entitled to fix a compensation or mesne profits for use and occupation of the premises at the same rate on which the landlords could have been able to let out the premises and earned rent if the tenants could have vacate the premises. The learned counsel for the Applicants submitted that he was relief on three leave and license agreement which were executed in 31.10.2007, 26.3.2008 and 15.2.2008. He submitted that he was also relied on the ready reckoner and valuation report, which was submitted by his valuer . It was submitted that in respect of the leave and license agreement, they were 5 CAW 665 of 2009 in WP 23 of 2006 executed in the same area which was situated just opposite the building in which the suit premises was situated. It was submitted that so far as the first agreement dated 31.10.2007 is concerned, the licensee was paying compensation at the rate of Rs.8,00,000/- for a month. In respect of the second agreement dated 26.3.2008, the licensee had agreed to pay rent of Rs.3,75,000/-p.m. and in respect of third agreement dated 15.2.2008 is concerned, the license fee was Rs.2,50,000/- since deposit was Rs. 1 crore. It was submitted that the valuer had given his valuation was more than Rs.10 crores and he submitted that so far as the ready reckoner is concerned, the rate of Rs.2,60,000/- p.m. and the area of the premises 4.35 sq.mtrs. 5. On the other hand, the learned counsel appearing on behalf of the Respondents submitted that the building was constructed prior to 1949 and the building was in a dilapidated condition. It was submitted that the Applicants were not applied to claim the market rate. It was submitted that the Applicants had purchased the property in 1965 for Rs.3 lacs and the Applicants, therefore, could not claim interim rent at the rate of Rs.8 to 10 lacs. 6 CAW 665 of 2009 in WP 23 of 2006 6. The learned Senior Counsel has invited my attention to the affidavit in reply filed by the Respondents herein. It was submitted that the Respondents had spent huge amount of money at their own costs and expenses towards repairs of the said property after obtaining permission from the Municipal Corporation. It was submitted that the Applicants had not maintained the building properly and repairs were not carried out. It was further submitted that rent for the month of March, 2000 is was Rs.1,306.94. It was further submitted that instances of the leave and license agreements on which reliance was places, was not comparative to the facts and circumstances of the terms of the agreement. It was further submitted that the market value of the suit premises should not be treated at par with a newly constructed building. It was submitted that the suit premises were situated in an old and dilapidated building. It was also submitted that ready reckoner would not be reliable for the purpose of determining the mesne profits. The learned Senior Counsel also invited my attention to the judgment of the Apex Court in the case of Atma Ram Properties (P) Ltd. (supra). and more particularly, paragraph 20 of the said judgment wherein the Apex Court had observed that said order passed by the Rent Control Tribunal was confirmed by the Apex 7 CAW 665 of 2009 in WP 23 of 2006 court in the case of Atma Ram Properties (P) Ltd. (supra). It was submitted that at the highest, this Court would fix the compensation at the rate of Rs.25,000/- p.m. in order to ensure that the landlords could bear necessary expenses for maintenance of the building and for the use and occupation of the premises by the tenants during the pendency of the writ petition. 7. I have heard both the counsel at length. Before taking into consideration the rival submissions, it is necessary to take into consideration the law laid down by the Apex court in the case of Atma Ram Properties (P) Ltd. (supra) and State of Maharashtra vs. Super Max International Pvt. Ltd. (supra) 8. The Apex Court in the case of Atma Ram Properties (P) Ltd. (supra), after taking into consideration the provisions of Order 41 Rule 5 and the provisions of the Rent Act came to the conclusion in paragraph 19 that: “19. To sum up, our conclusions are: (1) While passing an order of stay under Rule 5 of Order 41 of the Code of Civil Procedure, 1908, the appellate court does have jurisdiction to put the applicant on such reasonable terms as would in its opinion reasonably compensate the decree-holder for loss occasioned by delay in execution of 8 CAW 665 of 2009 in WP 23 of 2006 decree by the grant of stay order, in the event of the appeal being dismissed and insofar as those proceedings are concerned. Such terms, needless to say, shall be reasonable. (2) In case of premises governed by the provisions of the Delhi Rent Control Act, 1958, in view of the definition of tenant contained in clause (1) of Section 2 of the Act, the tenancy does not stand terminated merely by its termination under the general law; it terminates with the passing of the decree for eviction. With effect from that date, the tenant is liable to pay mesne profits or compensation for use and occupation of the premises at the same rate which the landlord would have been able to let out the premises and earn rent if the tenant would have vacated the premises. The landlord is not bound by the contractual rate of rent effective for the period preceding the date of the decree. (3) The doctrine of merger does not have the effect of postponing the date of termination of tenancy merely because the decree of eviction stands merged in the decree passed by the superior forum at a latter date.”. 9 CAW 665 of 2009 in WP 23 of 2006 New judgment was referred to a Larger Bench and three judges' judgment of the Apex Court in the case of State of Maharashtra vs. Super Max International Pvt. Ltd. (supra), confirmed the order passed by the Apex Court in the case of Atma Ram Properties (P) Ltd. (supra). The Apex Court in paragraph 45 to the said judgment has observed as under: “45. in Atma Ram Properties the Court viewed the issue exactly in the same way (See paragraphs 6,8 and 9 of the decision). Further, the decision also answers Mr. Lalit's submission, that the tenancy did not come t end on the passing of the decree but would continue until the tenant was actually physically evicted from the premises in execution of the decree. In Atma Ram Properties the Court framed two issues arising for consideration as follows: “This submission raises the following two issues : (i) in respect of premises term rate; and (ii) up to what point of time is the tenant liable to pay compensation for use and occupation of the tenancy premises unbound by the contractual rate of rent to the 10 CAW 665 of 2009 in WP 23 of 2006 landlord?” The Court answered the first issue as follows: “We are, therefore, of the opinion that the tenant having suffered a decree or order for eviction may continue his fight before the superior forum but, on the termination of the proceedings and the decree or order of eviction first passed having been maintained, the tenancy would stand terminated. @ page-SC 733 with effect from the date of the decree passed by the lower forum. In the case of premises governed by rent control legislation, the decree of eviction on being affirmed, would be determinative of the date of termination and the decree of affirmation passed by the superior forum at any subsequent stage or date, would not, by reference to the doctrine of merger have the effect of postponing the date of termination of tenancy.” The second issue was answered as follows: “With effect from that date (the passing of the decree of eviction), the tenant is liable to pay mesne profits or compensation for use and 11 CAW 665 of 2009 in WP 23 of 2006 occupation of the premises at the same rate at which the landlord would have vacated the premises. The landlord is not bound by the contractual rate of rent effective for the period preceding the date of the decree.” 9. In my view, therefore, in keeping view the judgment of the Apex Court in the said aforesaid cases, this Court can fix the compensation or mesne profits which has been paid for the use and occupation by the tenants during pendency of the writ petition in this Court. The Apex Court also has directed this Court that if an application is filed by the landlords for furnishing security or fixing mesne profits, the said application should be decided on its own merits. 10. In my view, so far as the mesne profits which are concerned prior to the filing of the writ petition in this Court are concerned, it would be appropriate if the Small Causes Court is directed to decide the said application on merits and in accordance with law and the stay granted by the Small Causes court to the application filed by the Applicants for fixation of mesne profits from the date of filing of the suit is vacated. The Small Causes Court shall expeditiously decide the said application and, in any case, within a period of one year. The Small Causes Court, however, shall not implement the order 12 CAW 665 of 2009 in WP 23 of 2006 without seeking leave of this Court since the writ petition is pending in this Court. 11. So far as the reliefs of mesne profits during pendency of the writ petition is concerned, in view of the ratio of the judgment of the Apex Court in the case of Atma Ram Properties (P) Ltd. (supra), this Court will have to take into consideration the valuation of the property as of today. Taking into consideration the conclusion in Atma Ram Properties (P) Ltd.'s case which is found in paragraph 19 sub-clause 92) and in that context, the compensation of the interim mesne profit will have to be fixed. The suit premises is situated at Altamount Road, which is a prime locality in the city of Bombay. The Applicants have relied on three leave and license agreements in respect of the premises which are admeasuring about 2200 to 2400 sq.ft. The said premises are situated in the building which is situated on the road which is directly opposite to the suit property. Apart from that the valuer has also given his valuation report in which he has stated that the market value of the property is about Rs.10 crores. According to the ready reckoner, the valuation of the property would come to Rs.2,60,000/- p.sq.mtrs. Which is equivalent to Rs.9,00,000/- p.sq.ft. In my view, the submissions made by the learned Senior Counsel for the Respondents 13 CAW 665 of 2009 in WP 23 of 2006 that the interim mesne profits or compensation should not be fixed by taking into consideration the market value cannot be accepted. The Apex Court in very clear terms in paragraph 19 of the judgment in the case of Atma Ram Properties (P) Ltd. (supra) has held that in the cases where question of fixing the mesne profits or compensation arise, the Court should take into consideration the same rate at which the landlord would have been able to let out the premises and earn rent if the tenant would have vacated the premises and that the landlord was not bound by the contractual rate of rent effective for the period preceding the date of the decree. 12. Taking into consideration the leave and license agreements, which are annexed to the application and ready reckoner's report as also the other facts and circumstances pointed by the Respondents herein, in my view, it would be appropriate if the tenants are directed to pay to deposit compensation at the rate of Rs.5,00,000/- p.m. from the date of the civil application which is filed by the Applicants herein. The Respondents-tenants shall deposit the said amount in this Court within a period of 12 weeks from the date. The said amount shall be invested in a Nationalized Bank. Hearing of the writ petition is expedited. The Writ Petition to be placed on the final hearing board in the 14 CAW 665 of 2009 in WP 23 of 2006 week commencing from 11th July, 2011. Civil Application is, accordingly, disposed of. 13. The tenants should be deposit the compensation at the same rate till the pendency of the writ petition. If the amount is not deposited, liberty is granted to apply to for vacate the interim relief. (V.M. KANADE J.)