Landmark Eviction Case: Supreme Court Upholds Mesne Profits in Tenant Dispute

The Supreme Court of India, in a recent ruling, settled a long-standing dispute regarding the eviction of tenants and the payment of mesne profits. The case, M/s. Martin & Harris Private Limited & Anr. v. Rajendra Mehta & Ors., revolved around a commercial property in Jaipur and the financial obligations of tenants who continued to occupy the premises despite an eviction decree.

The dispute began when the plaintiffs, Rajendra Mehta and others, filed a suit for eviction, possession, recovery of rent, and a permanent injunction against M/s. Martin & Harris Private Limited. The suit was based on Section 13 of the Rajasthan Premises (Control of Rent and Eviction) Act, 1950, commonly referred to as the ‘Old Act.’ The eviction suit, originally filed in 2002, was decreed in favor of the plaintiffs in 2016. The trial court’s decision was upheld by the appellate court in 2017. However, the second appeal, admitted in 2017, led to an extended stay on eviction, prompting the plaintiffs to seek mesne profits.

Petitioner’s Arguments

The appellants, M/s. Martin & Harris Private Limited, challenged the High Court’s order directing them to pay mesne profits at the rate of Rs. 2,50,000 per month. Their main contentions included:

• Under Section 20 of the Rajasthan Rent Control Act, 2001 (‘New Act’), the maximum mesne profits payable in a commercial tenancy should be capped at three times the standard rent.
• The standard rent was fixed at Rs. 45,000 per month, meaning the highest permissible mesne profit should be Rs. 1,35,000 per month, not Rs. 2,50,000.
• The High Court’s calculation of mesne profits did not consider factors such as the construction year, location within an inner road, and the DLC (District Lease Committee) rates.
• The area of the tenanted premises was wrongly calculated, leading to an inflated mesne profit assessment.

Respondent’s Arguments

The plaintiffs (respondents) countered the arguments, asserting:

• The suit was filed under the Old Act, and the New Act does not apply to cases initiated before its commencement in 2003.
• The High Court’s assessment of mesne profits was equitable and based on fair market rates for similar commercial properties.
• The property is located on a prime commercial road in Jaipur’s New Colony, which justifies the mesne profit amount.
• The appellants had continued to benefit from occupying the property despite an eviction decree, warranting higher compensation.

Supreme Court’s Observations

The Supreme Court, while analyzing the case, made several key observations:

• The applicability of the New Act was ruled out, as the suit was initiated under the Old Act and remained pending when the New Act came into force.
• The argument that mesne profits should be capped at three times the standard rent under the New Act was legally flawed.
• The High Court had thoroughly considered the market conditions, the commercial value of the premises, and prior judicial precedents before fixing the mesne profits.
• The calculation of the tenanted area had already been determined in prior proceedings, making it impermissible for the appellants to challenge it anew.
• The principle that a tenant who continues to occupy premises post-eviction must pay fair compensation was reaffirmed, citing the precedent in Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd.

Final Judgment

Based on these findings, the Supreme Court ruled:

• The mesne profits at Rs. 2,50,000 per month were fair and reasonable, given the location and commercial potential of the property.
• The appeal against the mesne profits order was dismissed, reaffirming the plaintiffs’ right to adequate compensation.
• The appellants must pay the pending mesne profits and continue making monthly payments as per the High Court’s directives.

This judgment reinforces the legal position that tenants who continue to occupy a property despite eviction decrees must compensate landlords at prevailing market rates. It serves as a precedent for future disputes involving eviction and mesne profits.

Read also: https://judgmentlibrary.com/supreme-court-sets-aside-possession-decree-tenant-rights-and-order-xii-rule-6-explained/

Petitioner Name: M/s. Martin & Harris Private Limited & Anr..
Respondent Name: Rajendra Mehta & Ors..
Judgment By: Justice Indira Banerjee, Justice J.K. Maheshwari.
Place Of Incident: Jaipur, Rajasthan.
Judgment Date: 05-07-2022.

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