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Timestamp: 2019-04-25 22:22:24+00:00

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Law Web: Whether mesne profits include profits due to improvements made by person in wrongful possession?
Whether mesne profits include profits due to improvements made by person in wrongful possession?
In the case of unlawful possession of a tenant at sufferance, the liability arises ex delicto and he will be liable for damages in the form of mesne profits. Therefore, in ultimate analysis, whether the position of the appellant is that of a trespasser or a tenant at sufferance, it hardly makes any difference as far as the liability of the defendant to compensate. The appellant is liable not for payment of the rent but for damages or mesne profits. In Girish Chander Lahiri v. Soshi Roy, ILR 27 Cal. 951 (PC), the Privy Council observed that mesne profits were in the nature of damages which the Court may mould according to the justice of the case. The award of mesne profits is meant to compensate a person who was deprived of rightful posession. According to Section 2(12) CPC, the term 'mesne profits' include not only the profits which a person in wrongful possession actually received but also those which he might have received with ordinary diligence but does not include profits due to improvements made by person in wrongful possession.
1. Both the Appeals can be disposed of under common Judgment at the admission stage.
2. O.S.No. 1487 of 1987 was filed by the Plaintiffs (Respondents in A.S.No. 115/96) seeking judgment and decree against the 1st Defendant (The Appellant in A.S.No. 115/96) by directing Defendant No. 1 to vacate the suit schedule property and deliver the vacant peaceful possession to the Plaintiffs and to further direct the Defendant No. 1 to pay a sum of Rs. 30/000/- as damages for unlawful possession and occupation of the suit premises from 1-6-1986 to 18-6-1987 and future damages @ Rs. 1,000/- per day till the delivery of the posession is effected. The learned Principal Subordinate Judge, Vijayawada, who tried the Suit passed decree and judgment on 16-11-1995 directing the 1st Defendant to deliver the suit schedule property to the Plaintiffs within a period of two months from the date of passing of the judgment and also further directed to pay a sum of Rs. 10,000/- per month towards the damages from 1-6-1987 till the date of the delivery of the vacant possession.
3. Aggrieved by the said judgment and decree of the Court below, the 1st Defendant filed the Appeal No.115/96. Similarly, the plaintiffs filed A.S.No. 482 /96 inasmuch as they are aggrieved to the extent of not allowing the full damages as claimed.
The Hindustan Petroleum Corporation Limited, (hereinafter called the 'Corporation') is the appellant in A.S.No. 115/96. The respondents in the said appeal are referred to as the 'landlords' for the sake of convenience. As per the plaint averments in O.S.No. 487/1987 on the file of the Principal Subordinate Judge, at Vijayawada, the suit schedule property belongs to the landlords. A vacant site of 750 sq. yards situate in Machavaram, Vijayawada, Vijayawada town, in Krishna District was leased out to the then ESSO Standard, Eastern Incorporation, a foreign company, under the registered lease deed dated 5-12-1967. The period of lease was fixed at 10 years commencing from 1-6-1967 thereby ending on 31-5-1977. The rent as stipulated in the lease deed was Rs. 200/- per month. The Parliament enacted Act IV of 1974 (ESSO Acquisition of Undertakings in India Act) under which all the properties, interest, rights and liabilities of the former ESSO company were acquired by the Hindustan Petroleum Corporation Ltd. Thus, the Corporation became the tenant of the landlords in place of ESSO Company under the same terms and conditions of Lease-Deed dated 5-12-1967. By virtue of Sub-section (2) ofSection 5, on the expiry of term of lease or tenancy, such lease or tenancy if so desired by the Government be renewed on the same terms and conditions on which the lease or tenancy was held by ESSO immediately before the appointed date. Admittedly, in the instant case, the lease expired on 31-5-1977. However, by virtue of the provisions of Act IV of 1974, the Tenant is entitled to exercise the option to continue with the same terms and conditions of the lease for a further period of 10 years. Therefore, by virtue of the said statutory provision, the Corporation exercised the right to continue for further period of l0 years. Thus, the Lease Deed is deemed to have been extended by 10 years from 1-6-1977 to 31-5-1987. The landlords required the place for residential purpose, so that it could fetch more income. Therefore, a notice dated 4-4-1987 was issued to the Corporation requiring the Corporation to vacate the premises on the expiry of 10 years on 31-5-1987, and hand over the vacant possession. However, it appears that the Corporation made an effort to request the landlords to renew the lease for another 10 years which was rejected. Since the schedule property was being used by the Corporation, even though tenure of lease had expired by 31-5-1987 and as the property is required for the personal occupation and use of the landlords, the suit was filed for eviction and also for damages @ Rs. 1,000/- per day from 1-6-1987 till the date of handing over the vacant possession of the suit schedule property. Five witnesses were examined on behalf of the landlords and one witness was examined on behalf of the Corporation. Exs.A-1 to A-10 and Exs. X-1 to X-10 were marked for the plaintiffs, while Exs.B-1 to B-20 were marked for the Corporation. The learned Subordinate Judge after considering the evidence and record came to the conclusion that the landlords are entitled for the possession of the suit schedule property. He also directed that the Corporation shall pay a sum of Rs. 10,000/- per month from 1-6-1987 towards damages.
5. It is contended by the learned Counsel for the Corporation Sri P.V.S. Kumar that the judgment and decree of the learned Subordinate Judge is illegal and arbitrary. He submits that quit notice Ex.A-7 dated 16-3-1987 issued to the Corporation is not in conformity with the provisions of Section 106 of Transfer of Property Act. under Section 106 of the Act the termination of lease should expire with the end of the moth of the tenancy and in as much as the said notice did not contain such a stipulation there is no notice in the eye of law as required under Section 106 of the Transfer of Property Act. We are not inclined to accept the contention raised by the learned Counsel for the simple reason that Section 106of Transfer of Property Act would come into operation in the absence of a contract or local Law of usage to the contrary. Admittedly, in the instant case, the schedule premises was leased out under a lease deed dated 5-12-1967 for 10 years and the same was continued by another 10 years by virtue of the exercise of the option which is available to the Corporation under the provisions of the Act IV of 1974. Under Clause 2(e) of the lease deed (Ex.A-1), the tenant agreed to deliver the possession of the demised premises at the expiration of the lease. Again under Clause 4, it was agreed that the tenant will be responsible and liable to deliver the possession immediately on the expiry of the lease period without any notice. Thus, by dispensing with the requirement of giving notice on the expiry of the lease period, the parties must be deemed to have entered into a contract to the contrary and, therefore, the strict terms of Section 106 need not be complied with. Hence, even if the quit notice is not strictly in accordance with Section 106, it does not become invalid.
6. It is also nextly contended by the learned Counsel for the Corporation that award of damages @ Rs. 10,000/- per month is wholly illegal inasmuch as the position of a tenant continuing after the expiry of leave period is that of a tenant by sufference, but not of a trespasser. Even otherwise, he submits that the damages are highly excessive and has no rationale. On the other hand, the learned Counsel for the landlords Sri T. Bali Reddy submits that the Corporation continues to occupy the premises, even after expiry of extended period of 10 years on 31-5-1987 and thereby they are treated as trespassers and hence the Corporation is liable to pay the damages. He relies on the decision of a Division Bench of this Court reported in Kothuru Peda Kama Raju v. Kummara Simhachalam, 1993 (1) APLJ 51 (SN) and also the decision of the Orissa High Court in Dolly Das v. Hindustan Petroleum Corporation Ltd., AIR 1994 Orissa 102 It is also contended that the landlords should be reasonably compensated for the deprivation of profitable commercial use to which the land could have been put to. He pleads for award of higher amount as damages.
7. Then, the question that would arise for consideration is whether the landlords are entitled to claim damages? If so, award of damages by the learned Principal Subordinate Judge is reasonable under the circumstances of the case?
8. The learned Counsel for the Corporation submits that the Court below fell in error by awarding damages for the use and occupation of the premises. The learned Counsel argued that at the most, the appellant can only be treated as tenant at sufferance on the expiry of the lease and the appellant cannot be treated as a trespasser. It is therefore submitted that there is no liability for damages and the obligation is only to pay the rent even after the expiry of the lease. The learned Counsel, relying upon the passage in Mulla's Transfer of Property Act submits that there is distinction between a tenant at sufferance and a trespasser. In the case of the latter, from the very inception, the possession is unlawful whereas in the case of the former the possession was initially lawful, but its continuance becomes wrongful. It is contended that the tenancy at sufferance arises by implication of law so that it may not operate as 'trespass'.
9. On the other hand, the learned Counsel for the respondents, relying upon the decision of the Orissa High Court in Dolly Das v. Hindustan Petroleum Corporation Ltd., AIR 1994 Orissa 102 submits that on the expiry of the lease, the appellant is in the position of a trespasser only and he cannot avoid the obligation of making good the loss which the respondents suffered by deprivation of enjoyment of the land. It is submitted that the appellant cannot avoid the liability to pay reasonable damages on the ground of being a tenant at sufferance.
"If, after the expiry of the period of lease or after its determinations tenant merely holds over without the landlords' consent there is no "tenancy of any kind at all. If in such case, the tenant continues in possession without landlord's consent he becomes what in English law is called a 'tenant by sufferance'. This is really no tenancy at all in the strict sense and requires no notice to determine it, the expression being merely a fiction to avoid the continuance of possession operating as a trespass. It is different from the concept of a tenancy at will which arises by implication of law in certain cases of permissive possession. No notice is necessary to terminate a tenancy at sufferance. But the case of tenancy by holding-over is different and is governed by the provisions of Section 116, T.P. Act. Tenancy by holding-over is a creature of a bilateral consensual act and does not come into existence by a mere unilateral intendment or declaration of one of the parties."
In the case of unlawful possession of a tenant at sufferance, the liability arises ex delicto and he will be liable for damages in the form of mesne profits. Therefore, in ultimate analysis, whether the position of the appellant is that of a trespasser or a tenant at sufferance, it hardly makes any difference as far as the liability of the defendant to compensate. The appellant is liable not for payment of the rent but for damages or mesne profits. In Girish Chander Lahiri v. Soshi Roy, ILR 27 Cal. 951 (PC), the Privy Council observed that mesne profits were in the nature of damages which the Court may mould according to the justice of the case. The award of mesne profits is meant to compensate a person who was deprived of rightful posession. According to Section 2(12) CPC, the term 'mesne profits' include not only the profits which a person in wrongful possession actually received but also those which he might have received with ordinary diligence but does not include profits due to improvements made by person in wrongful possession. As per Section 2(12), measure of mesne profits is thus "the value of use of land to the person in wrongful possession", vide Fateh Chand v. Balkishan Dass, .
"The normal measure of damages is the market rental value of the property occupied or used for the period of wrongful occupation or user. There is little authority, but this measure is cosonant with general principles and with the name of the action for wrongful occupation as one for mesne profits. If the rental value varies due to market fluctuations during the period of wrongful occupation, these fluctuations should be taken into account. If the defendant makes improvements on the land, the rental value should be assessed upon the unimproved value."
12. In the present case, there is no evidence of the profit which the defendant-appellant had made. It is not in dispute that a petrol bunk was set up by the Corporation and till the date the statutory tenancy came to an end, i.e., 1-6-1987, the Corporation enjoyed the demised land for 20 years paying a rent of Rs. 200/-. If we have to go by the concept of mesne profits under Section 2(12), we have to exclude the profit attributable to the improvements made on the land. Excluding the improvements made on the land, what the defendant would have fetched on an open plot of land of 750 square yards in a well developed locality, utilised for a commercial purpose. As already observed, it is not possible to ascertain the actual profit made by the appellant as there is no evidence to that effect and as the land was not used merely as an open plot. In these circumstances, the proper criterion would be the reasonable rental venue of this open plot of land of 750 sq. yards utilised for a commercial purpose. Examined from the stand point of the plaintiff who was deprived of the possession, the same consideration will hold good and the loss to the plaintiff will be in terms of the rent he would have got in the open market unless, of course, some special damage to the plaintiff is proved. Thus, whether we go by the concept of mesne profits as. per Section 2(12) of C.P.C. or by the wider concept adverted to above, the criterion to be applied is the same. We must have regard to the reasonable rental value which this plot of land could have fetched. The rentals of other pieces of property more or less of the same description is a recognised method of determining the mesne profits, vide Haji Mohamed v. Globe Theaters, AIR 1956 Mad. 216.
13. In the present case, evidence has been let in to assess the rental values of the buildings in the neighbourhood before the trial Court. Before the trial Court, P.Ws. 3 to 5 were examined to assess the rental value of the premises in the vicinity. P.W.3 is the Post Master of Machavaram Post Office. He stated that the rent of the office is Rs. 3,500/- per month and the area occupied by the office is 3000 square feet. Thus, the rent comes to Re.1-05 ps. per sq. feet. P.W.4, the Bank Manager, stated that his premises is situated at a distance of 100 yards from the suit schedule property and he was paying rent of Re. 1-80 ps. per sq. feet. P.W.5 is a Chartered Engineer. He stated that the suit site is located in a commercial area by the side of Eluru Road and that he prepared the plans for construction of the building. The rental value in that locality will be quite high. P.W.1 who is the plaintiff deposed to the execution of the lease deed and subsequent extension by virtue of the statutory provisions. He stated that there are commercial complexes in the locality and that they had proposed to construct a complex and poultry. They have also sufficient financial resources for the construction of the complex. Since they are deprived of all the income, they claim Rs. 30,000/- per month towards damages.
14. The question that would fall for consideration is the measure of damages. As already noted, evidence was let in to establish the rental values of the leased premises. There is no evidence to cover the lease of open plot. As per the evidence and documents, it can be taken that the rent would be around Re. 1 /- to Re.1-50 ps. per so. foot of built-up area where heavy investments were made for construction of buildings. To compensate the fair return for the investment, the rent would have been fixed. Admittedly, open plot of 750 sq. yards was leased out and there was no investment by the landlords. The rent was fixed at Rs. 200/- per month and the Corporation paid such a rent for 20 years. It cannot be disputed that the area in which the petrol bunk was established has now been developed and rent potentiality has defintely increased. The Court below was basically guided by the rental values of the built-up areas and the same principle cannot be applied to the open plots. There is also no definite evidence to the effect that but for the occupation by the defendant, the plaintiffs would have built up a commercial or residential complex in the near future and thus derived higher income even if that is a relevant criterion. It is not known what profit the plaintiffs could have made by starting a poultry as initially stated by them. The evidence Is vague and inconsistent. We cannot, therefore, estimate the damages as if it is a built-up area. Thus, we find that the measure of damages fixed at Rs. 10,000/- per month is not supported by relevant evidence or reasonable basis and we accordingly set aside the said finding. Keeping in view the general increase in rental values and the location of the plot in a developed area, we consider that damages at Rs. 3,500/-per month (calculated at about 0.50 paise per sq. foot) for the first five years i.e., from 1-6-1987 to31-5-1992 and at Rs. 5,000/- per month from 1-6-1992 till the date of handing over the vacant possession of the suit property, would be quite reasonable.
15. Accordingly, A.S. No. 115 of 1992 is partly allowed. The decree and judgment of the Court below relating to fixation of damages at Rs. 10,000/- per month is set aside. Keeping in view the fact that the petrol bunk is situate on the land and to enable the Corporation to secure suitable place, we direct that the Corporation shall vacate the suit schedule premises and hand over the vacant possession of the same to the respondents within a period of six months from today. The amount of damages awarded under this order shall be paid by the Corporation to the respondent within a period of three months, failing which the amount shall carry interest (c) 15% per annum. The Judgment and decree of the lower Court is deemed to have been modified to the extent noted above.
16. A.S. No. 482 of 1996 stands dismissed. No costs in both the appeals.

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