Provisions Of Rent Control Act Inapplicable In Determining Mesne Profits Once Tenancy Is Terminated U/S 106 Of Transfer of Property Act: Allahabad High Court

The Allahabad High Court has held that once tenancy is terminated under Section 106 of the Transfer of Property Act, 1882, provisions of the Rent Control Act would not apply in determining mesne profits with regard to rent payable for the property. It was held that the prevalent market rate would be considered while determining the rate for the mesne profit.

Justice Neeraj Tiwari held that “once after service of notice under Section 106 of Transfer of Property Act, 1992, tenancy is terminated, the status of tenant would only be trespasser and mesne profit shall be determined, based upon market rate prevailing in the area. Provisions of Rent Control Act would not be applicable.”

Case Background

Revisionist approached the High Court against order relating to vacation of the commercial house occupied by the revisionist and the decretal amount and enhancement of mesne profits at the rate of 15%, to be given by them. Revisionists submitted that they would vacate the commercial house in question within the period of a year. They further stated that they would pay the monthly rate of Rs. 3.27 lakhs for the said period, which was not disputed by the opposite party. However, revisionists challenged the enhancements of mesne profits at the rate of 15% per annum.

Counsel for revisionist contended that the Uttar Pradesh Regulation of Urban Premises Tenancy Act, 2021(The Act), provided for a maximum enhancement of mesne profit at the rate of 7% per annum for non-residential buildings.

Per contra, counsel for opposite party submitted that the impugned order had been passed when the Act was not in force. It was submitted that even the Uttar Pradesh Urban Buildings (Regulation Of Letting, Rent And Eviction) Act, 1972 was also not applicable at the time.

Opposite party contended that the only way to fix the enhancement of mesne profit was through the prevalent market rates, which he had done through an affidavit that remained undisputed by the revisionists.

High Court Verdict

The Court granted the revisionists a period of one year from 27.05.2024 to vacate the property in question with four conditions. The Court held that the revisionist was to file an affidavit within two weeks before the Judge, Small Causes Court/ADJ Court No.7, Ghaziabad with regard to the vacation of the commercial accommodation. Revisionist was directed to deposit the entire decretal amount within a period of four weeks before the Judge, Small Causes Court/ADJ Court No.7 which was to be adjusted in the case that any amount had already been deposited by them.

They were further directed to pay a sum of Rs. 3.27lakhs as the monthly rent for the property in question, on or before the 7^th day of every month till the property was vacated. It was held that in the case that any of the aforementioned conditions were violated, the order given would lose effect and the plaintiff-respondent would be at liberty to proceed against the defendant-revisionist in accordance with the law.

The Court held that given that the original suit was filed in the year 2008, when the Act was not in force, no provision of the Act would be applicable to the matter at hand. The Court examined Section 9 of the Act, which provided for the Revision of Rent and held that Section 9 dealt with the revision of rent and had nothing to do with mesne profit.

“From perusal of the heading of section, it is apparently clear that it deals with revision of rent and has nothing to do with the mesne profit.”

The Court relied on Union of India and Anr. v. Smt. Suman Gupta and Ors where the Allahabad High Court had held that in the case of termination of tenancy by notice under Section 106 of Transfer of Property Act, 1882, the enhancement of mesne profit would be determined on the basis of market rate and not on the basis of provision of any statutory provision.

In Atma Ram Properties (P) Ltd, v. M/s. Federal Motors Pvt. Ltd., the Apex Court held that if a tenant continued occupying a premises after the termination of tenancy, he would be held to be a “unauthorised and wrongful occupant” and that the damages or mesne profits would be passed for the period of occupation till he delivered the vacant property to the landlord. Further, the Court held that in the case that the in the case that the value of the real property was higher than the rent earned, the amount of compensation for the use and occupation of property would be assessed at the higher value.

Justice Tiwari held that notice was served to the revisionist and his tenancy was terminated, making him a trespasser. Accordingly, the Court reaffirmed the mesne profit rate of 15% determined on the prevalent market rate and dismissed the revision.

Case Title: Punjab National Bank Earlier Oriental Bank of Commerce v. Sanjeevani Shiksha Samiti 2024 LiveLaw (AB) 369 [S.C.C. REVISION No. - 76 of 2024]

Citation: 2024 LiveLaw (AB) 369

Counsel for Revisionist: P.K. Jain, Sr. Advocate assisted by Saurabh Kumar Pandey

Counsel for Opposite Party: Utkarsh Birla

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