SUMER CORPORATION versus VIJAY ANANT GANGAN & ORS.

Citation: [2022] 9 S.C.R. 690 · Decided: 09-11-2022 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Case Partly allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 9 S.C.R.
SUMER CORPORATION
v.
VIJAY ANANT GANGAN & ORS.
(Civil Appeal No. 7774 of 2022)
NOVEMBER 09, 2022
[M. R. SHAH AND M. M. SUNDRESH, JJ.]
Mesne profit – Compensation for use and occupation of the
premises by the tenant – Leased property is situated in Worli area of
Mumbai at a very prominent place – Suit for eviction – Trial court
dismissed suit – Appellate Bench of Small Causes Court, however,
ordered eviction – Revision before High Court – During pendency
of revision before High Court, Sumer Corporation applied for
impleadment and was added as respondent no. 19 – Respondent
no. 19 was claiming to have right, title and interest in the suit property
(lease) pursuant to the deed of conveyance executed in the year
2008 for a sale consideration of Rs. 5.50 crores – By impugned
order, while admitting the revision application and while staying
the eviction decree passed by the Appellate Bench, the High Court
inter alia directed the original revisionist to deposit Rs. 2,50,000/-
per month towards compensation as a condition of stay – Original
Respondent no. 19 filed instant appeal – Held: The approach
adopted by the High Court is not a sound principle of law to form
the basis for determining the compensation in this case – While
determining the monthly compensation, High Court considered the
fair rate of return @ 6.5% annually on the amount for which the
appellant purchased the property in the year 2008, i.e., Rs. 5.50
crores – The aforesaid could not have been the basis while
determining the monthly compensation – If the approach adopted
by the High Court is accepted and/or approved, in a given case, it
may happen that the lessor might have purchased the property forty
years back and/or long back and if the said approach is considered
and thereafter the monthly compensation is determined, the same
cannot be said to be a reasonable compensation – Matter remitted
to High Court for fresh determination of compensation for use and
occupation of the premises by the tenant.
[2022] 9 S.C.R. 690
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Partly allowing the appeal, the Court
HELD: 1.1 As observed and held by this Court in the case
of Atma Ram Properties (P) Ltd. from the date 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. [Para 7.1][697-F-G]
1.2 In the case of Super Max International Private Limited
and Ors., it is further observed and held 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. Therefore, in a revision/
appeal preferred by the tenant, who has suffered an eviction
decree, the appellate/revisional court while staying the eviction
decree can direct the tenant to pay the compensation for use and
occupation of the tenancy premises upon the contractual rate of
rent and such compensation for use and occupation of the premises
would be 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. In the present case, the High Court
has not done that exercise and has determined the compensation
considering the market value/value at which original respondent
No. 19 acquired the rights of the suit property for a sum of
Rs. 5.50 cores and thereafter, considering estimated return @
6.5% per annum, the High Court has determined/awarded the
compensation for use and occupation of the premises by the tenant
@ Rs. 2,50,000/- per month. The aforesaid method adopted by
the High Court while determining the compensation cannot be
accepted. The High Court was required to undertake exercise
and to determine the compensation 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. Under the
circumstances, the matter is to be remanded to the High Court
for fresh determination of the compensation for use and occupation
of the premises by the tenant, who has suffered the eviction
SUMER CORPORATION v. VIJAY ANANT GANGAN & ORS.
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