Mesne Profits -As Claimed Under East Punjab Rent Restriction Act 1949

This word is often used as a legal tool, asserting to be a legal right, to recover the gains(profits), from a person who is in wrongful possession of the land/ property, by way of compensation or damages.

Under the present modern landlord and tenant laws, the concept of mesne (pronounced 'mean') profits travels from the medieval origins of the feudal system, wherein all land was owned by the King. He would dole it out to his barons on the terms that they provided him with soldiers whenever he wanted to raise an army. Soon this customised into a way of raising money by charging rent for the land from the barons. In turn, the barons would let out a part of the land to farmers, who would pay rent – usually in kind, by providing livestock or crops – on being permitted to keep some of the produce for themselves. This way the concept of chains of tenancies was born.

The person to whom the farmer paid his rent came to be known as the 'mesne landlord'. The word meant 'intermediate' in old French (a bit like the mean of two numbers) and used to be spelt 'meen'. It metamorphosed into the present spelling through the middle ages.

Thus, the phrase was originally 'mesne rents and profits' meaning all the rent or profit from the land that could be extracted by the intermediate landlord.

Mesne profits has also been defined under the Code of Civil Procedure 1908, Section 2(12) as :- "means 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 but the person in wrongful possession."

Because the word rent has acquired a special meaning in modern property law, the phrase 'mesne profits' is now also used for the claim of compensation that a landlord sets up, after a tenancy has been brought to an end, but the tenant has failed to vacate the tenanted premises/land. It signifies that while the occupier is no longer a tenant, the landlord remains entitled to be compensated for the tenant's continued occupation. It is now also, sometimes substituted by the phrase 'damages for use and occupation'.

The concept of Mesne Profits under the Rent Law was laid down by the Hon'ble Supreme Court in M/S. Atma Ram Properties (P) Ltd vs M/S. Federal Motors Pvt. Ltd 2005 (1) RCR (R) 1

Whereby it was held that by the Hon'ble court:

" (1) while passing an order of stay under Rule 5 of Order 41 of the Code of Civil Procedure, 1908, the appellate Court does have jurisdiction to put the applicant on such reasonable terms as would in its opinion reasonably compensate the decree-holder for loss occasioned by delay in execution of decree by the grant of stay order, in the event of the appeal being dismissed and in so far as those proceedings are concerned. Such terms, needless to say, shall be reasonable;

(2) in case of premises governed by the provisions of the Delhi Rent Control Act, 1958, in view of the definition of tenant contained in clause (l) of Section 2 of the Act, the tenancy does not stand terminated merely by its termination under the general law; it terminates with the passing of the decree for eviction. With effect from that date, 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;

(3) the doctrine of merger does not have the effect of postponing the date of termination of tenancy merely because the decree of eviction stands merged in the decree passed by the superior forum at a latter date. "

The said judgement was followed by various High Courts and in many other subsequent judgements of the Supreme Court of India.

It was also held in Anderson Wright And Co. vs Amar Nath Roy And Ors. AIR 2005 SC 2457:

"5. As held by this Court in Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. , once a decree for eviction has been passed, in the event of execution of decree for eviction being stayed, the appellants can be put on such reasonable terms, as would in the opinion of the appellate court reasonably compensate the decree holder for loss occasioned by delay in execution of the decree by the grant of stay in the event of the appeal being dismissed. It has also been held that with effect from the date of 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 on being vacated by the tenant. While determining the quantum of the amount so receivable by the landlord, the landlord is not bound by the contractual rate of rent which was prevalent prior to the date of decree.

6. The learned counsel for the appellants submitted that the appellants cannot be held liable to pay anything more than the standard rent of the premises, in spite of the decree for eviction having been passed as the same is subjudice. This submission needs a summary dismissal in view of the Judgment of this Court in Atma Ram Properties (P) Ltd.'s case (supra). Both the parties have filed affidavit and counter affidavit, placing on record material giving the Court an idea of the rate of rent generally prevalent in the locality where the suit property is situated. Canara Bank on the first floor of this building is paying rent @ Rs. 25/- per sq. ft. other than maintenance and municipal taxes. One Rumpa Ghosh entered as the tenant in the year 2002 is paying rent @ Rs. 32/- per sq. ft. Taking an overall view of the material made available by the parties, we think that the appellants should, from the date of the decree of the eviction, pay mesne profits/compensation for use and occupation @ Rs. 15/- per sq. ft. subject to final determination of the same by a competent forum."

The said principle was further confirmed by the Apex Court in State of Maharashtra v. M/s. Super Max International Pvt. Ltd 2009 (2) RCR (R) 246

"45. In Atma Ram Properties the Court viewed the issue exactly in the same way (See paragraphs 6, 8 & 9 of the decision). Further, the decision also answers Mr. Lalit's submission that the tenancy did not come to end on the passing of the decree but would continue until the tenant was actually physically evicted from the premises in execution of the decree. In Atma Ram Properties the Court framed two issues arising for consideration as follows:

"This submission raises the following two issues : (i) in respect of premises enjoying the protection of rent control legislation, when does the tenancy terminate; and (ii) up to what point of time is the tenant liable to pay rent at the contractual rate and when does he become liable to pay compensation for use and occupation of the tenancy premises unbound by the contractual rate of rent to the landlord ?"

The Court answered the first issue as follows:

"We are, therefore, of the opinion that the tenant having suffered a decree or order for eviction may continue his fight before the superior forum but, on the termination of the proceedings and the decree or order of eviction first passed having been maintained, the tenancy would stand terminated with effect from the date of the decree passed by the lower forum. In the case of premises governed by rent control legislation, the decree of eviction on being affirmed, would be determinative of the date of termination of tenancy and the decree of affirmation passed by the superior forum at any subsequent stage or date, would not, by reference to the doctrine of merger have the effect of postponing the date of termination of tenancy."

The second issue was answered as:

"With effect from that date (the passing 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." (words in parenthesis added)

We are in respectful agreement with the decision of the Court in Atma Ram Properties.

46. In light of the discussions made above we hold that in an appeal or revision preferred by a tenant against a order or decree of an eviction passed under the Rent Act it is open to the appellate or the revisional Court to stay the execution of the order or the decree on terms, including a direction to pay monthly rent at a rate higher than the contractual rent. Needless to say, that in fixing the amount subject to payment of which the execution of the order/ decree is stayed, the Court would exercise restraint and would not fix any excessive, fanciful or punitive amount."

Thus it was laid down that once the tenant has been ejected by way of an ejectment decree, then the appellate court under Order 41 Rule 5, CPC, has the jurisdiction to stay such ejectment on such terms and conditions as it deems fit, and the tenant shall be liable to pay the mesne profits at the prevailing market rate for the use and occupation of such premises.

The ratio laid down in Atma Ram Properties , Anderson Wright and Super Max cases, Supra, was followed by the Punjab and Haryana High Court in various judgements under the East Punjab Rent Restriction Act, 1949, (hereinafter referred to as th Act), holding that once an ejectment has been ordered, then the Landlord is entitled to claim mesne profits from the tenant, and the appellate authority, while granting stay of ejectment order, can put the tenant on such terms and conditions, so as to make him liable for payment of rent at the market rate.

Two of the judgements on the point, rendered by Punjab and Haryana High Court, are 2015 RCR (R) 337 and 2013 RCR (R) 344.

It would be pertinent to point out at this stage that the various judgements rendered by the Punjab and Haryana High Court, for fixation of mesne profits, are based on the principles, as enunciated by the judgement of the Apex Court in Atma Ram Property Case, Supra. The said case was a matter under the Delhi Rent Control Act 1958, wherein, there is no specific provision for staying the ejectment order, against which the appeal has been preferred, therefore for the purpose of passing a stay order, the provisions of Code of Civil Procedure, 1908, are applicable. It would be appropriate to reproduce the relevant paragraphs of the said judgement:

"6. The order of eviction passed by Rent Controller is appealable to the Rent Control Tribunal under Section 38 of the Act. There is no specific provision in the Act conferring power on the Tribunal to grant stay on the execution of the order of eviction passed by the Controller, but sub-section (3) of Section 38 confers the Tribunal with all the powers vested in a Court under the Code of Civil Procedure, 1908 while hearing an appeal. The provision empowers the Tribunal to pass an order of stay by reference to Rule 5 Order 41 of the Code of Civil Procedure 1908 (hereinafter 'the Code', for short). This position was not disputed by the learned senior counsel appearing for either of the parties.

7. Sub-Rules (1) and (3) of Rule 5 Order 41 of the Code read as under: -

"Rule 5 - Stay by Appellate Court - (1) An appeal shall not operate as a stay of proceedings under a decree or order appealed from except so far as the Appellate Court may order, nor shall execution of a decree be stayed by reason only of an appeal having been preferred from the decree; but the Appellate Court may for sufficient cause order stay of execution of such decree.

xxx xxx xxx xxx

(3) No order for stay of execution shall be made under sub-rule (1) or sub-rule (2) unless the court making it is satisfied -

(a) that substantial loss may result to the party applying for stay of execution unless the order is made;

(b) that the application has been made without unreasonable delay; and

(c) that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.

xxx xxx xxx xxx"

8. It is well settled that mere preferring of an appeal does not operate as stay on the decree or order appealed against nor on the proceedings in the court below. A prayer for the grant of stay of proceedings or on the execution of decree or order appealed against has to be specifically made to the appellate Court and the appellate Court has discretion to grant an order of stay or to refuse the same. The only guiding factor, indicated in the Rule 5 aforesaid, is the existence of sufficient cause in favour of the appellant on the availability of which the appellate Court would be inclined to pass an order of stay. Experience shows that the principal consideration which prevails with the appellate Court is that in spite of the appeal having been entertained for hearing by the appellate Court, the appellant may not be deprived of the fruits of his success in the event of the appeal being allowed. This consideration is pitted and weighed against the other paramount consideration : why should a party having succeeded from the Court below be deprived of the fruits of the decree or order in his hands merely because the defeated party has chosen to invoke the jurisdiction of a superior forum. Still the question which the Court dealing with a prayer for the grant of stay asks to itself is : Why the status quo prevailing on the date of the decree and/or the date of making of the application for stay be not allowed to continue by granting stay, and not the question why the stay should be granted.

9. Dispossession, during the pendency of an appeal of a party in possession, is generally considered to be 'substantial loss' to the party applying for stay of execution within the meaning of clause (a) of sub-rule (3) of Rule 5 Order 41 of the Code. Clause (c) of the same provision mandates security for the due performance of the decree or order as may ultimately be passed being furnished by the applicant for stay as a condition precedent to the grant of order of stay. However, this is not the only condition which the appellate Court can impose. The power to grant stay is discretionary and flows from the jurisdiction conferred on an appellate Court which is equitable in nature. To secure an order of stay merely by preferring an appeal is not the statutory right conferred on the appellant. So also, an appellate Court is not ordained to grant an order of stay merely because an appeal has been preferred and an application for an order of stay has been made. Therefore, an applicant for order of stay must do equity for seeking equity. Depending on the facts and circumstances of a given case an appellate Court, while passing an order of stay, may put the parties on such terms the enforcement whereof would satisfy the demand for justice of the party found successful at the end of the appeal. In South Eastern Coalfields Ltd. v. State of M.P. & Ors., (2003)8 SCC 648, this Court while dealing with interim orders granted in favour of any party to litigation for the purpose of extending protection to it, effective during the pendency of the proceedings, has held that such interim orders, passed at an interim stage, stand reversed in the event of the final decision going against the party successful in securing interim orders in its favour; and the successful party at the end would be justified in demanding compensation and being placed in the same situation in which it would have been if the interim order would not have been passed against it. The successful party can demand (a) the delivery to it of benefit earned by the opposite party under the interim order of the High Court, or (b) compensation for what it has lost, and to grant such relief is the inherent jurisdiction of the Court. In our opinion, while granting an order of stay under Order 41 Rule 5 of the CPC, the appellate court does have jurisdiction to put the party seeking stay order on such terms as would reasonably compensate the party successful at the end of the appeal in so far as those proceedings are concerned. Thus, for example, though a decree for payment of money is not ordinarily stayed by the appellate Court, yet, if it exercises its jurisdiction to grant stay in an exceptional case it may direct the appellant to make payment of the decretal amount with interest as a condition precedent to the grant of stay, though the decree under appeal does not make provision for payment of interest by the judgment-debtor to the decree-holder. Robust common sense, common knowledge of human affairs and events gained by judicial experience and judicially noticeable facts, over and above the material available on record - all these provide useful inputs as relevant facts for exercise of discretion while passing an order and formulating the terms to put the parties on. After all, in the words of Chief Justice Chandrachud, speaking for the Constitution Bench in Olga Tellis and Ors. v. Bombay Municipal Corporation and Ors., 1986 RRR 290 (SC) : (1985)3 SCC 545, - "commonsense which is a cluster of life's experiences, is often more dependable than the rival facts presented by warring litigants".

Thus, the basis of grant of mesne profits was the provisions of CPC Order 41 rule 5.

At this stage, it would be relevant to compare the provisions of Appeal, under the Delhi Rent Control Act, 1958, and under the East Punjab Rent Restriction Act, 1949.

Delhi Rent Control Act, 1958:

S.38. Appeal to the Tribunal. –(1) An appeal shall lie from every order of the Controller made under this Act [only on questions of law] to the Rent Control Tribunal (hereinafter referred to as the Tribunal) consisting of one person only to be appointed by the Central Government by notification in the Official Gazette:

[Provided that no appeal shall lie from an order of the Controller made under section 21.]

(2) An appeal under sub-section (1) shall be preferred within thirty days from the date of the order made by the Controller:

Provided that the Tribunal may entertain the appeal after the expiry of the said period of thirty days, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal in time.

(3) The Tribunal shall have all the power vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when hearing an appeal.

East Punjab Rent Restriction Act 1949

Section 15-(1)(a) The 1[State] Government may, by a general or special order, by notification confer on such officers and authorities as they think fit, the powers of appellate authorities for the purposes of this Act, in such area or in such classes of cases as may be specified in the order.

(b) Any person aggrieved by an order passed by the Controller may, within fifteen days from the date of such order or such longer period as the appellate authority may allow for reasons to be recorded in writing, prefer an appeal in writing to the appellate authority having jurisdiction. 2[In computing the period of fifteen days the time taken to obtain a certified copy of the order appealed against shall be excluded.].

(2): - On such appeal being preferred, the appellate authority may order stay of further proceedings in the matter pending decision on the appeal.

A bare comparison of the above mentioned provisions, under the two enactments, would clearly reveal that while there is no provision of grant of stay under the Delhi Rent Control Act, 1958, and under section 38(3) of the said Act, the provisions of CPC are specifically made applicable, however in The East Punjab Rent Restriction Act, 1949, under section 15(2) thereof, there is a clear provision of grant of stay of ejectment order appealed from, and therefore, the strict provisions of CPC are not applicable for the grant of the interim relief.

It may also be noticed here that though Rent controller and Appellate Authority, as constituted under the East Punjab Act, have powers to adjudicate the disputes between landlords and tenants, but they are not be treated as civil courts, as under CPC. They are merely to be treated as persona designata, under the said Act, who are free to design their own procedure, and strict principles of Code of Civil Procedure are not applicable to them. Refer to M/s Pitman's Shorthand Academy V. M/s B Lila Ram and Sons 195- PLR 1 (FB), Raghu Nath v. Romesh Duggal, (P&H) (D.B.) 1980 AIR (PB) 188 and Sawan Ram Vs. Gobinda Ram and anr. 1980 AIR Punjab 106 (FB).

The Punjab and Haryana High Court in the case of Vijay Kumar and another V. Rahul Malhotra 2015 (2) RCR (C) 80, had, although, noticed an argument, wherein the said distinction was pointed out, as follows:

"5.Counsel for the petitioners has argued that the Appellate Authority could not have assessed the mesne profits and the application should have been filed before the Rent Controller who would have allowed opportunity to both the parties to lead evidence and thereafter, the mesne profits could not have been assessed. In this regard, he has referred to an order of the Supreme Court in the case of M/s Bird Travels (P) Ltd. v. Smt. Amarjit Kaur and others, Civil Appeal No. 4589 of 2012 (Arising out of S.L.P. (Civil) No. 3299 of 2012), decided on 11.05.2012. - He has also submitted that the order of stay passed by the Appellate Authority is under Section 15(2) of the Act which is unlike Order 41 Rule 5 (3) of the Code of Civil Procedure, 1908 (hereinafter referred to as the "CPC") and has also submitted that the judgment of the Supreme Court in the case of M/s. Atma Ram Properties (P) Ltd. v. M/s. Federal Motors Pvt. Ltd., 2005(1) R.C.R.(Rent) 1 : 2005(1) R.C.R.(Civil) 212 is not applicable as in the said case, stay was granted under Order 41 Rule 5 of the CPC in which conditions were there for payment of mesne profits."

However, relying upon Atma Ram Properties case the said revision petition was dismissed holding that:

"10. The conclusions which were summed up by the Supreme Court in M/s. Atma Ram Properties (P) Ltd.'s case (supra) are as under: -

"(1) while passing an order of stay under Rule 5 Order 41 of the Code of Civil Procedure, 1908, the appellate Court does have jurisdiction to put the applicant on such reasonable terms as would in its opinion reasonably compensate the decree-holder for loss occasioned by delay in execution of decree by the grant of stay order, in the event of the appeal being dismissed and in so far as those proceedings are concerned. Such terms, needless to say, shall be reasonable;

(2) in case of premises governed by the provisions of the Delhi Rent Control Act, 1958, in view of the definition of tenant contained in clause (1) of Section 2 of the Act, the tenancy does not stand terminated merely by its termination under the general law; it terminates with the passing of the decree for eviction. With effect from that date, 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 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.

(3) the doctrine of merger does not have the effect of postponing the date of termination of tenancy merely because the decree of eviction stands merged in the decree passed by the superior forum at a latter date."

11. The argument raised by counsel for the petitioners that in M/s Bird Travels (P) Ltd.'s case (supra), the Supreme Court has remanded the case back to the Rent Controller to decide and as such all cases are to be decided by the Rent Controller for the purpose of deciding the question of mesne profits is not acceptable because in that case, the Supreme Court was of the view that the fixation of mesne profits requires evidence from both the sides and thus the matter was remanded back to the Rent Controller to decide the question of mesne profits after holding proper inquiry by allowing the parties to lead their respective evidence. However, in the present case, the Appellate Authority, while dealing with the application for payment of mesne profits by the landlord, allowed the parties to lead their respective evidence in which the landlord led evidence by way of lease deed of SCO No. 6, Sector 11-D, Chandigarh, which has been let out @ L 1.5 lacs per month, whereas the demised premises in the present case is SCF No. 21 in the same Sector 11 of Chandigarh for which the mesne profits has been fixed by the Appellate Authority to the tune of L 1 lac only. Since no evidence was led by the petitioners-tenants, therefore, they cannot have a grievance and ask for determination of mesne profits by the Rent Controller in terms of the order passed by the Apex Court in M/s Bird Travels (P) Ltd.'s case (supra)."

As noticed above, there is a stark and a substantial distinction between the two enactments i.e. Delhi Act and the East Punjab Act. Further, it is apparent that Atmaram Case, supra, was a case pertaining to Delhi Act. The above paras would clearly indicate that none of the judgements of Punjab and Haryana High Court has dealt with this distinction, although in the case of Rahul Malhotra, supra, the Court, had noticed the said distinction. However, all the judgements had, merely relying upon Atmaram Case, supra, chosen to uphold the power of the Appellate Authority to grant mesne profits as a condition of staying the ejectment order.

Views Are Personal Only.

(The author is a practising advocate in the Punjab and Haryana High Court at Chandigarh)