Method To Determine Compensation For Use & Occupation Of Tenancy Premises By A Tenant Who Suffered Eviction Decree : Supreme Court Explains

The Supreme Court, in a judgment delivered on Wednesday (9 Nov 2022), explained the method to determine the compensation for use and occupation of the tenancy premises by a tenant who suffered an eviction decree.

From the date of the decree of eviction, the tenant is liable to pay mesne profits or compensation for use and occupation of the premises 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 of Justices MR Shah and MM Sundresh observed.

In this case, while admitting the revision application preferred by the tenant, who is aggrieved of the eviction decree , the High Cour directed the Tenant to deposit Rs. 2,50,000/- per month towards compensation as a condition of stay.  To arrive at this figure, the High Court considered the amount paid by the purchaser of the property in question (Sumer Corporation). Thus the Corporation challenged this order before the Apex Court.

Disagreeing with this method adopted by the High Court, the Apex Court bench, by referring to the decision in Atma Ram Properties (P) Ltd. Vs. Federal Motors (P) Ltd., (2005) 1 SCC 705 and State of Maharashtra and Anr. Vs. SuperMax International Private Limited and Ors., (2009) 9 SCC 772., observed: 

"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...As observed and held by this Court in the case of Atma Ram Properties (P) Ltd. (supra), from the date of the decree of eviction, the tenant is liable to pay mesne profits or compensation for use and occupation of the premises 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 landlord is not bound by the contractual rate of rent effective for the period preceding the date of the decree."

The bench observed 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 court, while remanding the case back to High Court, observed thus:

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.

Case details

Sumer Corporation vs Vijay Anant Gangan | 2022 LiveLaw (SC) 936 | CA 7774 OF 2022 | 9 Nov 2022 | Justices MR Shah and MM Sundresh

Counsel: Sr. Adv C.U. Singh for appellant, Sr. Adv Shekhar Naphade , Sr. Adv Siddhartha Dave for respondents

Headnotes

Tenancy - 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 - Referred to Atma Ram Properties (P) Ltd. Vs. Federal Motors (P) Ltd., (2005) 1 SCC 705 and State of Maharashtra and Anr. Vs. SuperMax International Private Limited and Ors., (2009) 9 SCC 772. (Para 7-8)

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