'Tenant At Sufferance' Who Is Continuing In Possession After Expiry Of Lease Is Liable To Pay Mesne Profits: Supreme Court

The Supreme Court observed that a tenant continuing in possession after the expiry of the lease is liable to pay mesne profits. 

"While a tenant at sufferance cannot be forcibly dispossessed, that does not detract from the possession of the erstwhile tenant turning unlawful on the expiry of the lease.", the bench comprising Justices KM Joseph and PS Narasimha observed.

The bench observed thus while dismissing an appeal filed by Indian Oil Corporation Ltd. against the decree in a suit filed by Sudera Realty Private Limited seeking mesne profits.

One of the issues raised in this case was whether the possession of appellant-tenant can be termed wrongful on the expiry of lease.?

In this regard, the court noted that Section 111(a) of the Transfer of Property Act, 1882 provides that the lease is determined by efflux of time, that is, on the expiry of the lease, the lease ends. Referring to Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. (2005) 1 SCC 705, the bench observed:

"A tenant continuing in possession after the expiry of the lease may be treated as a tenant at sufferance, which status is a shade higher than that of a mere trespasser, as in the case of a tenant continuing after the expiry of the lease, his original entry was lawful. But a tenant at sufferance is not a tenant by holding over. While a tenant at sufferance cannot be forcibly dispossessed, that does not detract from the possession of the erstwhile tenant turning unlawful on the expiry of the lease. Thus, the appellant while continuing in possession after the expiry of the lease became liable to pay mesne profits."

While dismissing the appeal, the court further observed:

What the landlord is entitled is, to get damages for the use and occupation at any rate, at which, the landlord could have let out the premises on being vacated by the tenant. Section 2(12), no doubt, includes profits, which the person, in wrongful possession, might, with ordinary diligence, have received therefrom. The liability of the tenant, to pay damages on the basis of the rate at which landlord could have let out the premises, may not be the same as the profit the tenant might have received with ordinary diligence..

...Once the lease comes to an end, the erstwhile tenant becomes a tenant at sufferance. He cannot be dispossessed, except in accordance with law. But he cannot, in law, have any right or interest anymore. Even though, under Section 108 of the Transfer of Property Act, if there is no contract to the contrary, the tenant may have the right, under Section 108(j), to transfer his interest absolutely or even by sub-lease or mortgage, when the lease expires by afflux of time, his interest as lessee would come to an end.

Case details

Indian Oil Corporation Ltd. vs  Sudera Realty Private Limited | 2022 LiveLaw (SC) 744 | CA 6199 OF 2022 | 6 September 2022 | Justices KM Joseph and PS Narasimha

Counsel: ASG Madhavi Diwan for the appellant, Sr. Adv A.M. Singhvi for the respondent

Headnotes

Code of Civil Procedure, 1908 ; Section 2(12) - Transfer of Property Act, 1882 ; Section 111(a) -  Tenant while continuing in possession after the expiry of the lease liable to pay mesne profits  - A tenant at sufferance is not a tenant by holding over. While a tenant at sufferance cannot be forcibly dispossessed, that does not detract from the possession of the erstwhile tenant turning unlawful on the expiry of the lease. (Para 60)

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