Analysis of the Supreme Court’s judgment in Bijay Kumar Manish Kumar HUF v. Ashwin Bhanulal Desai.^[1]

Brief facts

The judgment involves a legal dispute between Bijay Kumar Manish Kumar HUF (“Landlord”) and Ashwin Bhanulal Desai (“Tenant”) regarding the tenancy law that would be applicable to the lease deed dated November 20, 1992 (“Lease Deed”), viz., whether the tenancy should be governed by the West Bengal Premises Tenancy Act, 1997 (“WBPT Act, 1997”), which came into force subsequently, on July 10, 2001, or the provisions of the Transfer of Property Act, 1882 (“TP Act, 1882”).

The Landlord had alleged that the Tenant was in default in relation to the payment of rent since 2002 and in default in relation to the payment of his share of municipal tax since 1996. The Landlord had initiated eviction proceedings due to non-payment of rent, filing suits in the City Civil Court at Calcutta (“Trial Court”) for eviction, recovery of possession, and an injunction to prevent the Tenant from transferring the property.

The Tenant, in defense, filed an application under Order VII Rule 11 of the Civil Procedure Code, 1908 (“Application”) seeking the rejection of the suit on grounds of jurisdiction, claiming the Lease Deed was governed by the WBPT Act, 1997, and arguing the Lease Deed was undetermined, the claims were legally unsound, and the suit was misvalued and insufficiently stamped.

The Trial Court rejected the Tenant’s Application, stating that the Tenant’s claims could not be substantiated without a full trial. The Tenant then approached the Calcutta High Court (“High Court”), which upheld the Trial Court’s decision in its Civil Revisional Jurisdiction.

The Tenant thereafter went in appeal before the Supreme Court, the Supreme Court remanded the case to the Trial Court directing it to frame and decide preliminary issues related to the maintainability of the suit and the applicability of the enactments.

Thereafter, the Trial Court framed two issues: (i) whether the suit is triable under the provisions of the WBPT Act, 1997, or the TP Act, 1882, and (ii) whether the suit is maintainable. The Trial Court held that the Lease Deed dated November 20, 1992, predated the WBPT Act, 1997 and was governed by the TP Act, 1882, making the suit maintainable. Aggrieved by the said order of the Trial Court, the Tenant approached the High Court, wherein the High Court dismissed all four suits filed by the Landlord, holding that the WBPT Act, 1997 applied, and thus the suits were not maintainable. The Landlord then filed Special Leave Petitions (“SLPs”) challenging the said order of the High Court.

During the pendency of these SLPs, the Landlord filed interlocutory applications seeking payment of rent and other benefits. The Landlord argued that the Lease Deed had been forfeited due to non-payment, and the Tenant was liable to pay mesne profits. The Tenant countered that no court had declared the end of the landlord-tenant relationship, and thus no occupation charges were due.

Observation and Judgment by the Supreme Court

The Supreme Court observed that the Tenant was in default on rent and taxes for a considerable period and since the Lease Deed predated the WBPT Act, 1997, it would be governed by the TP Act, 1882, making the Landlord’s suit maintainable. The Court further addressed the issue of mesne profits, which the Landlord claimed were due from the Tenant since the Lease Deed had been forfeited.

In this regard, the Supreme Court referenced multiple precedents, including Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd.^[2] and Martin and Harris (P) Ltd. v. Rajendra Mehta^[3], affirming that landlords are entitled to mesne profits post-eviction decree.

The Tenant contented that since in the present case no decree of eviction is passed, and there is no stay awarded, the question of such payment does not arise. In this regard, the Supreme Court relied on the judgment of Indian Oil Corporation Ltd. v. Sudera Realty Private Limited^[4] to state that mesne profit become payable on continuation of possession after ‘expiry’ of lease deed i.e., June 18, 2007, in the present case.

The Supreme Court observed that “after all we cannot lose sight of the fact that the very purpose for which a property is rented out, is to ensure that the landlord by way of the property is able to secure some income. If the income remains static over a long period of time or in certain cases, as in the present case, yields no income, then a landlord would be within his rights, subject of course, to the agreement with their tenant, to be aggrieved by the same.”

The Supreme Court, after considering the submissions and the law, directed the Tenant to deposit an amount of approx. Rs. 5.15 crores, as calculated by the Landlord, with the Court’s registry within 4 (four) weeks. The Supreme Court emphasized that the Tenant’s continued possession after the Lease Deed’s forfeiture made them liable to pay mesne profits.

Conclusion and analysis

The Supreme Court’s decision in this landlord-tenant dispute underscores some reiteration of judicial thinking to have balanced approach to such conflicts. Historically, rent control legislations and judicial decisions in India heavily favored tenants to protect them from exploitation, given the acute housing shortage and socio-economic vulnerabilities. However, this decision of the Supreme Court regarding the fact that mesne profits would be payable by a tenant staying on in the premises, post termination and directing the deposit of mesne profits to protect the landlord’s interest is a just measure to prevent misuse of the law by errant tenants, and towards ensuring that the landlord/lessor receives fair compensation when tenants remain in possession after the lease has been forfeited or terminated.

This landmark judgment underscores the imperative for tenants to fulfill their lease obligations, particularly timely rent payment. The Court’s directive for the tenant to deposit a significant sum pending the appeal outcome sends a resolute message about the repercussions of non-payment and underscores the significance of upholding legal responsibilities.

Footnotes:

[1] A No. 120219/2020 in Special Leave Petition (c) No. 4049 of 2020

[2] (2005) 1 SCC 705

[3] (2022) 8 SCC 527

[4] 2022 SCC OnLine 1161