Supreme Court: Tenant In Posession After Lease’s Expiration Obligated To Pay Mesne Profits

CASE TITLE:
Indian Oil Corporation Limited Vs. Sudera Reality Private Limited

DATE OF ORDER:
6 September 2022

JUDGES:
Justice K.M. Joseph and Justice P.S. Narasimha

PARTIES:
Appellant: Indian Oil Corporation Limited
Respondent: Sudera Reality Private Limited

SUBJECT

The Supreme Court stated that a renter who maintains possession of the property after the lease’s expiration is responsible for paying mesne earnings. The party being sued is the appellant. The division bench of the High Court modified the order issued by the learned Single Judge in a matter brought by the respondent seeking mesne profits and partially approved the appeal filed by the appellant by the impugned judgement.

IMPORTANT PROVISIONS

Code of Civil Procedure

• Section 2(12)- “mesne profits” of property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but shall not include profits due to improvements made by the person in wrongful possession.

Transfer of Property Act

• Section 111(a) - A lease of immoveable property determines by efflux of the time limited thereby.

BRIEF FACTS

• The respondent demised a non-air-conditioned guest house on the ninth level, as well as the centrally air-conditioned second, third, and fourth floors of Premise No. 1, Shakespeare Sarani, Kolkata. The 21-year lease term was to begin on the day the aforementioned floors were turned over to the appellant lessee.
• The respondent additionally said that a supplementary agreement, validly registered on September 12, 1969, had modified the initial lease, dated November 21, 1968, in a number of ways. The respondent additionally asserted that the 4th level was turned over to the appellant on December 18, 1969, and that the 2nd and 3rd floors were turned over on September 12 and September 12, respectively.
• The failure of the appellant to join and work with the respondent in the process of finalising, signing, and registering an adequate lease instrument with relation to the second, third, and fourth floors was alleged. There is mention of an earlier lawsuit that was brought in 1978 but was settled before it could proceed to its logical conclusion.
• It is sufficient to note at this point that the appellant’s inability to transfer unoccupied possession of the second, third, and fourth floors after the lease’s expiration was the primary cause of the legal dispute.

ISSUES RAISED

• Whether the documents styled as agreement dated 21.11.1968 and the supplementary agreement for lease dated 12th September, 1969 constituted a lease?
• Whether the possession of 2nd and 3rd floors were handed over on 17.09.1969 and 4th floor stood handed over on 04.11.1970?
• Whether the appellant is a monthly tenant from November, 1969?
• Whether there was a prior determination of the lease of 21 years by the respondent, if so, whether the appellant is entitled to protection of the Tenancy Act?

ARGUMENTS ADVANCED BY THE PLAINTIFF

• The learned Counsel for the appellant submitted that the parties did have a legitimate lease deed. It was the admitted case, so the appellant could not change his mind about the situation. The argument that the lease deed was decided in 1977 was then proven to be untenable. The purported notice of termination is dated 07.12.1977. After 21 years of uninterrupted use, the lease came to an end due to the passage of time. It was based on the ruling in the case of Pabitra Kumar Roy and Another v. Alita D’Souza.
• The appellant claimed that the possession of all the three floors in question was handed over to it on 04.11.1970.
• The appellant further claimed that reading the mortgage deed, which was also executed on the same day as the supplementary lease deed, would show that the second, third, and fourth floors were described as “now in the course of construction on the said leasehold land” on September 12, 1969, the date the documents were executed. The appellant provided the cash because the respondent required them in order to finish erecting the structure.
• The appellant’s next claim was that the respondent terminated the lease dated 17.11.1968 during the 1977 development, turning the appellant into a monthly tenant and, more importantly, entitles it to benefits under the West Bengal Tenancy Act. This position was supported by the respondent’s notification dated 12.12.1977, which the appellant claimed ended the lease. According to the appellant the issuance of the notice was only the beginning of the issue.

ARGUMENTS ADVANCED BY THE RESPONDENT

• It was contented by the respondent, regarding the appellant’s attempt to develop a new case before this Court, that the appellant’s claim was de hors the facts in the current case, arguing that there was a fresh tenancy created as a result of the waiver.
• The respondent reiterated that the 2nd and 3rd floors were handed on or before September, 1969 and the security deposit for those floors already handed over, was made by 27.09.1969.
• According to the respondent, the statements made by the appellant in Calcutta Credit Corporation Ltd. that were cited as supporting evidence were merely obiter. To support the claim that the waiver does not result in a new tenancy, the rulings in Ranjit Chandra Chowdhury and Tayabali Jaffarbhai Tankiwala were cited.
• The respondent’s argument further contends that it must be recognised that the letter dated 19.10.1990 just asked the appellant to deliver possession of the second and third levels. The letter made reference to the lease’s impending expiration.

JUDGEMENT ANALYSIS

• The Court discovered that there was, in fact, a documented leasing agreement dated 21.11.1968. The lease had a 21-year term that started on the day the lessee received possession of the demised property. Additionally, the rent for the leased space was set.
• The Division Bench has determined in modification of the judgement of the learned Single Judge that the appellant was given possession of the second and third floors and fixed September 17, 1969 as the starting point because there are no records demonstrating the precise date. It was determined that on 4 November 1970, the appellant took control of the fourth floor.
• Without a doubt, the appellant’s position seemed to be that the possession was not transferred in full compliance with the agreement and that the accompanying amenities were not maintained. The bench believed that the High Court’s conclusions were reasonable, and as a result, held that the ownership of the second and third floors was given on September 17, 1969, and the fourth floor was given on November 4, 1970.
• The bench further observed that there was no basis for the claim that the appellant should be recognised as a monthly renter right from the beginning. Accepting such a position would, in the first place, be in contradiction with the appellant’s written assertion.
• The court determined that the renter was prohibited from submitting to the Transfer of Property Act’s authority by requesting remedy under Section 114 of the Act. The case of Savita Dey v. Nageswar Majumdar and Others was referred to because the Court likewise relied on its decision in that case. In the aforementioned decision, the court addressed a lease that ran from July 1, 1964, to June 30, 1985. It was determined that the tenant could not prevail based on the pre determination clause because the lease was signed before to the change that added subsection (2) to Section 3 in 1965.
• A tenant who remains in possession after the lease’s expiration may be considered a tenant at sufferance, which is a little higher status than that of a simple trespasser because, in the instance of a tenant who stays after the lease's expiration, his initial entry was legal. However, a tenant under duress is not a tenant who stays put. Even if a tenant can only be forced to leave on their own terms, this does not stop the former renter’s occupancy from being illegal when the contract expires. As a result, the appellant became obligated to pay mesne profits while continuing to be in possession after the lease’s expiration.

CONCLUSION

It was maintained by the Hon’ble Court that holding on would result in a new lease. The respondent’s acceptance of the sum following the lease’s expiration had no bearing on its legal position.As a result, it might not be viable to maintain that the respondent’s lawsuit should still be held to come within Article 51 of the Limitation Act and be barred as to certain of the claims made in it. The conclusion of the foregoing reasoning was that the appeals had any merit. The appeals must be rejected. The costs be split between the parties.

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