In CIVIL APPEAL No. 7774 of 2022-SC- In Revision/Appeal preferred by tenant, who has suffered eviction decree, Court can direct tenant to pay compensation for use & occupation of premises upon contractual rate of rent while staying such decree: SC
Justices M.R. Shah & M.M. Sundresh[09-11-2022]

Read Judgment: SUMER CORPORATION VS VIJAY ANANT GANGAN & ORS. 

Mansimran Kaur

New Delhi, November 10, 2022: While considering a matter of determination of compensation for use of the premises by the tenant, who had suffered the eviction decree, during the pendency of the revision application, the Supreme Court has opined that the High Court was required to determine the compensation at 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.

The Division bench of Justice M.M. Sundresh and Justice M.R. Shah partly allowed the present  appeal which was instituted against the impugned order  passed by the Bombay High Court whereby while admitting the revision application preferred by the contesting  respondents herein – original revisionists and staying the judgment passed  by the Appellate Bench, the High Court directed the first respondent- original revisionist to deposit  Rs. 2,50,000 per month towards the compensation / mesne profit, 

The Division bench of the view that the approach adopted by the High Court was not a sound  principle of law to form the basis for determining the compensation in this case. 

The property in question is situated in the Worli area of  Mumbai, which is in the heart of the city, at a very prominent place. The land on which the superstructure was constructed by the lessor was leased by the lessee by  Lease Deed dated August 16, 1949 for a period of 30 years. 

The original lessee erected a building consisting of ground and four upper storeys, known as  “Garment House”. In front of the “Garment House”, there were two chawl-like structures having  about 20 tenements. 

According to the original plaintiffs – lessors, after the death of the original lessor, his legal heirs  entered into a supplementary indenture of lease permitting the original lessee to demolish the old  structures standing on the property and erect new structures. The duration of the supplementary  lease was for a period of 98 years commencing from February 1, 1986. 

On or about April 1, 1987, the original lessee died. The original lessee executed a last will and  testament creating inter alia a charitable trust and appointing the appellant herein and one Amritlal  Gordhandas Jajal as executors and trustees. That thereafter in or about 1988, the eviction  proceedings were initiated. 

The Trial Court dismissed the suit. The decree was challenged by the original plaintiffs before the Appellate Bench of the Court of  Small Causes. During the pendency of the appeal, one Sumer Corporation, claiming to be a  transferee of the suit property from the legal heirs of the original lessors by a registered deed of  conveyance, applied for joinder to the appeal. 

By its judgment and order dated May 4, 2017, the Appellate Bench of the Small Causes Court  allowed the appeal and set aside the decree passed by the Trial Court and decreed the suit ordering  eviction of the defendants (including the original revisionist. 

Being aggrieved, the contesting respondents herein – original revisionist has filed the revision  application before the High Court. During the pendency of the Civil Revision Application (CRA),  the appellant – Sumer Corporation applied for impleadment and was added as respondent  nineteenth to the CRA. 

By the impugned order, the High Court had directed the original revisionist to deposit Rs 2,50,000 per month towards compensation as a  condition of stay. 

Feeling aggrieved and dissatisfied with the impugned order of interim compensation, the original  respondent - nineteenth, preferred the present appeal. 

“ Therefore, in a revision / appeal preferred by the tenant, who has suffered an eviction decree, the appellate / revisional court while staying the eviction decree can direct the tenant to pay the compensation for use and occupation of the tenancy premises upon the contractual rate of rent and such compensation for use and occupation of the premises would be at 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”, the Bench opined while referring to the judgments in State of Maharashtra and Anr. Vs. Super Max International Private Limited and Ors. and Atma Ram Properties (P) Ltd. Vs. Federal Motors (P) Ltd.

After considering the submissions from both the sides, the Court opined that the approach adopted  by the High Court was not a sound principle of law to form the basis for determining the  compensation in this case. In the present case, while determining the monthly compensation, the  High Court considered the fair rate of return @ 6.5% annually on the amount for which the  appellant purchased the property in the year 2008, i.e., Rs 5.50 crore, the Court noted. 

The aforesaid could not have been the basis while determining the monthly compensation. If the  approach adopted by the High Court is accepted and/or approved, in a given case, it may happen  that the lessor might have purchased the property forty years back and/or long back and if the said  approach is considered and thereafter the monthly compensation is determined, the same cannot  be said to be a reasonable compensation, the Court further stated. 

In view of the above, the Court deemed it fit to remand the matter to the High Court for fresh  determination of the compensation for use and occupation of the premises by the tenant, who  suffered the eviction decree, during the pendency and the final disposal of the revision application  by the High Court.

As a result, the present appeal was allowed partly.