Mesne Profits Claim Upheld: Supreme Court Allows Damages for Unauthorized Occupation

The case of Bharat Petroleum Corporation Ltd. & Anr. vs. ATM Constructions Pvt. Ltd. addresses a crucial issue in property law concerning the recovery of mesne profits (damages for unauthorized occupation) after the expiration of a lease. The Supreme Court ruled that the claim for mesne profits was a distinct cause of action from possession claims and was, therefore, maintainable even if not included in the original suit for eviction.

Background of the Case

The dispute arose over a commercial property that was originally leased to M/s Burma Shell Oil Storage and Distribution Company of India Ltd. (the predecessor of Bharat Petroleum) for 20 years from January 1, 1958. After multiple ownership transfers, the property came into the possession of ATM Constructions Pvt. Ltd., which sought to reclaim possession when the lease expired on December 31, 1997. The lessee refused to vacate, leading to prolonged litigation.

The first suit for eviction and possession was filed in 2006 and was decreed in favor of the plaintiff on October 30, 2010. However, the possession was only handed over in June 2022. A second suit was filed in 2020, claiming ₹1,28,90,000 as damages for unauthorized occupation from 1998 to 2019 and ₹30,50,000 per month from January 2020 until the date of handover. The defendants challenged this suit, arguing that the claim should have been made in the original eviction suit.

Petitioner’s Arguments

The appellants, Bharat Petroleum Corporation Ltd., contended:

The plaintiff should have included mesne profits in the original eviction suit; failure to do so barred them from making a separate claim later under Order II Rule 2 CPC.
The lease expired in 1997, and the claim was made in 2020, making it time-barred.
The second suit was an abuse of process as the damages were already implied in the eviction decree.

Respondent’s Arguments

The respondent, ATM Constructions Pvt. Ltd., countered:

The claim for mesne profits arose only after the unauthorized occupation began post-lease expiration.
The earlier suit only addressed possession, while the damages claim was a separate issue that could be pursued independently.
The Supreme Court has previously ruled that mesne profits are a continuing cause of action, allowing separate suits.
The company suffered financial losses due to the unauthorized occupation and was entitled to compensation.

Key Legal Issues Considered

1. Whether Mesne Profits Should Have Been Claimed in the Eviction Suit

The Court examined whether the law required mesne profits to be included in the original suit or if a separate claim was permissible.

2. Whether the Claim Was Time-Barred

The Court analyzed whether the claim for damages, made over 20 years after the lease expired, was valid under the law of limitation.

3. Precedents on Mesne Profits as a Separate Cause of Action

The Court considered past rulings, including:

Gurbux Singh vs. Bhooralal (1964): Recognized that separate suits for mesne profits are valid.
Indian Oil Corporation Ltd. vs. Sudera Realty Pvt. Ltd. (2022): Held that mesne profits accrue from day to day and form a continuing cause of action.

Supreme Court’s Verdict

The Supreme Court ruled in favor of the respondent, making the following observations:

Mesne profits and possession claims are distinct causes of action, and the omission of damages from the eviction suit does not bar a subsequent claim.
The claim for mesne profits is not time-barred because the unauthorized occupation continued, and damages continued to accrue.
Defendants who unlawfully occupy property must compensate the rightful owner, even if possession is contested in another suit.
The claim for mesne profits was legally valid, and the defendant’s challenge was dismissed.

Key Takeaways from the Judgment

Separate Suits for Mesne Profits Are Allowed: If a party does not claim mesne profits in an eviction suit, they can still file a separate suit later.
Mesne Profits Are a Continuing Cause of Action: The law allows compensation claims for unauthorized occupation over extended periods.
Defendants Cannot Occupy Property Without Paying: Unlawful occupants must pay damages for using another party’s property.
Judicial Recognition of Financial Losses: The Court acknowledged that property owners suffer financial harm when deprived of lawful possession.

This ruling strengthens property rights by ensuring that unauthorized occupants cannot escape liability for prolonged illegal possession.

Petitioner Name: Bharat Petroleum Corporation Ltd. & Anr..
Respondent Name: ATM Constructions Pvt. Ltd..
Judgment By: Justice Vikram Nath, Justice Rajesh Bindal.
Place Of Incident: Tamil Nadu.
Judgment Date: 30-11-2023.

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