PETITIONER:
L. KOCHIVAREED
Vs.
RESPONDENT:
P. MERIAPPA GOUNDER AND ORS.
DATE OF JUDGMENT07/02/1979
BENCH:
SARKARIA, RANJIT SINGH
BENCH:
SARKARIA, RANJIT SINGH
TULZAPURKAR, V.D.
SEN, A.P. (J)
CITATION:
1979 AIR 1214 1979 SCC (3) 150
ACT:
Mesne Profits-Liability for mesne profits, principle
of-Section 2(12) of the Code of Civil Procedure 1908 (Act V
of 1908).
Civil Procedure Code, 1908, Order XX Rule 12-
Construction of decree explained-Nature of the decree of the
Court dated April 22, 1958 clarified.
Words and Phrases-"Whichever event first occurs" in
Rule 12(1)(C)(iii) of order XX C.P.C.-Meaning of
Civil Procedure Code. S. 144-Scope of.
HEADNOTE:
Meriappa Gounder respondent No. 1 in C.A. 466/69 and
appellant 1 in C.A. 2375/69 filed a suit on August 23, 1950
in the District Court, Trichur, for specific performance of
an agreement dated May 22, 1950 made by one Soliappa
Chettiar. The said Soliappa Chettiar pleaded inability to
perform the contract in view of the refusal of one
Neelakanta Iyer a lessee of the factory to give up
possession. Pending the suit Late Kochivareed, husband of
the appellant in C.A. 466/69 obtained an assignment of the
lease from Neelakanta Iyer on March 5, 1951. On March 8,
1951 Soliappa Chettiar executed a sale deed of the suit
property in favour of one George Thatil, a nephew of
Kochivareed. In the course of the proceedings the trial
court appointed a Receiver to manage the suit property. On
March 21, 1951, Late Kochivareed obtained a lease, of the
suit property at a rent of Rs. 15,000/-for a period of one
year which was renewed for another year from the Receiver
and a sum of Rs. 30,000/- SO collected as rent for two years
was deposited in the Court by the Receiver.
The District Court on August 28, 1952 decreed the suit
for specific performance and mesne profits at a reduced rate
of Rs. 15,000/- per annum, instead of at Rs. 30,000/- per
annum as claimed. Against the decree two appeals were filed
in the High Court by Kochivareed and George Thatil. The High
Court allowed the appeals and dismissed the suit by its
judgment dated March 21, 1953. The appeal filed by Meriappa
Gounder (CA 129/56) was allowed by this Court as per its
judgment and decree dated April 22, 1958.
On the question of the liability of the mesne profits,
the present appeals arose out of interpretation of the
direction (e) of this Court's decree dated April 22, 1958.
Allowing the appeals by certificate in part the Court
^
HELD: 1. Mesne profits being in the nature of damages,
no invariable rule governing their award and assessment in
every case can be laid down and the "Court may mould it
according to the justice of the case". Even so one broad
basic principle governing the liability for mesne profits is
discernible
59
from section 2(12) of the Code of Civil Procedure which
defines 'mesne profits' to mean 'those profits which the
person in wrongful possession of property actually received
or might with ordinary deligence have received therefrom
together with interest on such profits, but shall not
include profits due to improvements made by the person in
wrongful possession." [68G-H, 69A]
Wrongful possession of the defendant is the very
essence of a claim for mesne profits and the very foundation
of the defandant's liability therefor, Generally, the person
in wrongful possession and enjoyment of the immovable
property is liable for mesne profits. But, where the
plaintiff's dispossession, or his being kept out of
possession can be regarded as a joint or concreted act of
several persons, each of them who participants in the
Commission of that act would be liable for mesne profits
even though he was not in actual possession and the profits
were received not by him but by some of his confederates.
Possession through another, such as a tenant may be
sufficient to create liability for mesne profits, if such
possession is wrongful. [69A-C and G]
2. In such a case, where the claim for mesne profits is
against several tresoassers who had combined to Keep the
plaintiff out of possession, it Is open to the Court to
adopt either of the two courses. It may by its decree hold
all such trespassers jointly and severally liable for mesne
profits leaving them to have their respective rights
adjusted in a separate suit for contribution; or it may, if
there is proper material before it ascertain and apportion
the liability of each of them on a proper application made
by the defendant during the same proceedings. [69C-D]
3. A decree under Order XX Rule 12 of C.P.C., directing
enquiry into mesne profits, howsoever expressed must be
construed to be a decree directing the enquiry in conformity
with the requirements of Rule 12(1)(c), 80 that the
decreeholder is not entitled to mesne profits for a period
(commencing from the date of the institution of the suit)
extending beyond three years from the date of the
preliminary decree. [69E-Fl
Chitturi Subhanna v. Kudappa Subbanna, [1965] 2 SCR
661; referred to.
4. The words "whichever event first occurs" in sub
clause (c)(iii) of clause I of Rule 12 of Order XX Civil
Procedure Code imply that the maximum period for which
future mesne profits can be awarded is three years from the
date of the decree for possession and mesne profits, finally
passed. The period of three years is to be computed from the
date of decree of this Court i.e. from April 22, 1958 and it
will expire on the date on which possession was delivered or
relinquished by the defendant in favour of the decreeholder
pursuant to that decree. In other words, the decree
mentioned in sub clause (iii) of clause (c) would be the
appellate decree dated April 22, 1958 of this Court. The
period of three years mentioned in the said subclause is,
therefore, to be reckoned from April 22, 1958. [73G-H, 74A-
B]
5. Section 144 of the Code of Civil Procedure, in
terms, says that for the purpose of the restitution, the
Court may make any orders, including orders for the payment
of interest, damages compensation and mesne profits which
are properly consequential on variation or reversal of the
decree. [77A-B]
There is nothing in the decree, dated April 22, 1958 of
this Court which expressly or by implication, prohibits the
payment of interest on the sum of
60
Rs. 30,000/- withdrawn by defendant 3 by way of
restitution. The trial court had rightly allowed interest.
[77B-C]
6. The decree dated April 22, 1958 of this Court was a
composite decree, partly final, and party preliminary. It
was final in so far as it granted the reliefs of specific
performance and possession on deposit of the price by the
Plaintiff. It was preliminary in as much as it directed an
inquiry with regard to the assessment of mesne profits and
as to who out of the defendants was/were liable for payment
of those mesne profits. But? it laid down in no uncertain
terms that only such of the defendants would be liable for
mesne profits "as may have been in possession of the
property". This direction in the decree means that only the
defendant or defendants found in actual possession and
enjoyment of the property would be liable for mesne profits.
[70A-C]
In the instant case:
(a) The third defendant was in sole, actual possession
and control of the suit property from March 3, 1951, when he
obtained the alleged assignment of lease in his favour from
Neelakanta Iyer. In terms of the decree of this Court,
therefore defendant 3 alone is liable for mesne profits in
respect of the period he was in possession (excepting the
period during which the property was under the management of
the Court Receiver). [71E-F]
(b) The contention that the possession of defendant 2
was the legal possession of an owner while that of defendant
3 was derivative possession of a lessee or licensee under
the former is not correct, since at no stage, in the Courts
below defendant 3 took up the position that he was in
derivative possession of the property under defendant 2. Nor
was there even a whisper in the pleadings that defendant 2
and defendant 3 were joint-tortfeasors and therefore jointly
and severally liable for mesne profits. [69H, 70C, G]
(c) There is nothing in the decree of this Court dated
April 22 1958, indicating that the amount deposited by the
plaintiff towards the price should have been sel off against
the liability of defendant 3 for mesne profits. On the
contrary, it allowed deduction of the amounts found due
against defendant 1 and defendant 2 from the deposit of Rs.
85.000/- to be made by the plaintiff towards the price, and
further directed that after such deduction, the balance of
such deposit made by the plaintiff, if any, shall be paid to
the third respondent (defendant 2) who is the assignee of
the second respondent (defendant 1) pendente lite. [71F-H]
(d) The plaintiff was not bound to suffer a set off in
favour of defendant 3, merely because defendant 2 or his
assignee withdrew the price deposited by the plaintiff
without furnishing any security for its refund or adjustment
towards the liability of defendant 3, there being no
evidence whatever, on record to show that such withdrawal
was the result of any collusion or conspiracy between the
plaintiff and defendant 2 and defendant 3. Even assuming
that both defendants 2 and 3 were liable for mesne profits
jointly and severally, then also, the plaintiff could at his
option. recover the whole of the amount of mesne profits
from either of them; and how such inter se liability of the
defendants was to be adjusted or apportioned was a matter
between the defendants only. [72A-C]
(e) Defendant 3 entered into possession of suit
property under a-l assignment of sham lease from Neelakanta
Iyer on March 5, 1951 during the
61
pendency of the plaintiffs suit, which was instituted on
August 25, 1950. The A plaintiff had deposited Rs. 50,000/-
sometimes after the presentation of the plaint. Under the
agreement of the sale, dated May 22, 1950 made by defendant
1 in favour of the plaintiff, the total sale considerations
was fixed @ Rs. 90,003/-. Out of it Rs 5,003/- had been paid
to defendant I on the very date of the agreement. It was
further stipulated that out of the balance, Rs. 50,000/-
would be paid by the plaintiff-purchaser at the time of the
registration of the sale deed which was to be executed and
registered on or before July 15, 1950. It was further
stipulated that on payment of the further sum of Rs.
50,000/- the plaintiff would be entitled to be put in
possession of the suit property. Thus when defendant 3
entered into possession, first under the garb of an assignee
of sham lease from Neelkanta Iyer, and then further
purchased the property with his on funds in favour of
defendant 2 pendente lite, he was fully conscious that he
was purchasing a litigation. His possession was therefore
wrongful qua the plaintiff from its inception [72E-H]
(f) Disallowance of the claim for deduction for
interest on the deposit of Rs. 50,000 which the plaintiff
had withdrawn on August 19, 1953 and had redeposited on 9-2-
1959 is incorrect. The defendant is entitled to interest @
6% per annum for the said period, after deduction the
interest for the period during which the property was under
the management of the Receiver. [74D-E]
(g) The plaintiff`s claim for mesne profits @ the rate
of Rs. 25,000/- has correctly been negatived. Since the
plaintiff did not object to the lease granted by the
Receiver to defendant 3 on an annual rental of Rs. 15,000/-
and since he did not produce any other reliable evidence,
the High Court was not wrong in holding that the mesne
profits should be on the basis of this rental value of Rs.
15,000/- [76A-C]
(h) The plaintiff, in view of the long drawn out
litigation is entitled to interest @ 6% per annum upto March
29, 1959. [76E-F]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 466 and
2375 of 1969.
From the Judgment and Order dated 6-8-78 of the Kerala
High Court in Appeal Suit Nos. 27/63 and 245/63.
K. S. Ramamurthy, Miss Pushpa Nambiar and A. S. Nambiar
for the Appellant in C.A. 466/69 and R 1 in C.A. 2375/69.
P. Govindan Nair, S. Balakrishnan and K. L. Rathi for
R. 1 in C.A. 466/69 and Appellant in CA 2375/69.
N. Sudhakaran, S. L. Aneja and K. L. Aneja for RR 2-3,
in C.A. 466/69 and For RR 3-4-in C.A. 2375/69.
The Judgment of the Court was delivered by
SAKARIA, J.-These two appeals on certificate arise out
of execution petition No. 118 of 1962 on the file of the
Subordinate Judge, Trichur, filed by P. Meriappa Gounder
(hereinafter referred to as the plaintiff) to execute the,
decree of the Supreme Court in C.A. 129/56
62
passed on April 22, 1958. The common facts, out of which
these appeals arise, are as follows:
The plaintiff filed a suit on August 23, 1950 in the
District Court, Trichur, for ‘specific performance of an
agreement, dated May 22, 1950, made by Soliappa Chettiar
(hereinafter referred to as defendant 1) to sell a factory
known as “Sivakami Tiles Works”, for a consideration of Rs.
90,003/-. The plaintiff made an advance payment on that very
date of a sum of Rs. 5,003/- to defendant 1. It was
stipulated in the agreement that the sale deed must be
executed and registered on or before July 15, 1950. It was
further provided that out of the balance of sale
consideration, Rs. 50,000/- would be paid by the plaintiff
at the time of the registration and for the remaining Rs.
35,000/-, the plaintiff was to execute a mortgage of the
suit property to be redeemed on or before May 31, 1951. It
was further agreed that on payment of Rs. 50,000/- at the
time of registration, the plaintiff would be put in
possession of the suit property. The plaintiff pleaded that
he was ready and willing to perform his part of the
agreement, but came to know that defendant 1 was trying to
evade his obligation under the agreement. Accordingly, the
plaintiff sent a registered notice, dated July 7, 1950,
through his lawyer to defendant 1, to which the latter
replied the same day, that the factory was in possession of
one Neelakanta Iyer as lessee, who had refused to give up
possession and therefore, it had become impossible to give
effect to the agreement to sell the factory, as giving
possession to the plaintiff was a condition precedent to the
execution of the sale deed. The plaintiff further pleaded
that the suit property was really in possession of defendant
1 and the alleged lease. in favour of Neelakanta Iyer was a
sham transaction and a device to evade payment of income
tax, and hence defendant 1 was bound to carry out the terms
of the agreement to sell.
The suit was contested by defendant 1 (who originally
was the sole defendant). – His case was that, although there
was an agreement to sell the suit property, it had been made
clear at the time when negotiation for sale was going on,
that the factory was in the possession of Neelakanta Iyer as
lessee and that it was a condition precedent to the sale
that Neelakanta Iyer would surrender his right under the
lease and give up possession and that if he refused to do
so, the agreement to sell would not be given effect to. The
defendant urged Neelakanta Iyer to surrender the possession,
but he refused to do so. In the circumstances” the contract
for sale had become incapable of performance. He denied that
the lease in favour of Neelakanta was a sham transaction.
63
Pending the suit, T. V. Kochivareed (the deceased
husband of the A appellant, Lucy Kochivareed in C.A. 466/69)
obtained an assignment of the lease (Ex. D-3) from
Neelakanta Iyer on March 5, 1951. Since Kochivareed was
later on, when the suit was pending in the Supreme Court
impleaded as defendant 3, for the sake of convenience the
appellant in C.A. 466/69, will hereinafter be referred to as
defendant 3
On March 8, 1951, defendant 1 executed a sale deed of
the suit property in favour of George Thatil, who is the
nephew of defendant 3, and will hereinafter be referred to
as defendant 2. Like defendant 3, he also joined as
defendant 2 at his own request, when the appeal was pending
in this Court.
On December 23″ 1950, the Court appointed a Receiver to
manage the suit property. On March 21, 1951, defendant 3
obtained a lease of the suit property at a rent Or Rs.
15,000/- for a period of one year from the Receiver. The
term of the lease was extended for one more year and two
years’ rent, amounting to Rs 30,000/- was collected and
deposited in the Court by the Receiver.
The District Court, Trichur, on August 28, 1952,
decreed the suit for specific performance and mesne profits
at a reduced rate of Rs. 15,000/- per annum, instead of Rs.
30,000/- per annum claimed by the plaintiff.
Against the decree of the Trial Court, two appeals were
filed in the High Court-one by defendant 3 and the other by
defendant 2. The High Court allowed the appeals and
dismissed the plaintiff’s suit by a judgment dated March 31,
1953.
Aggrieved, the plaintiff filed C.A. 129/56 in this
Court. The plaintiff’ appeal was allowed by this Court as
per its judgment and decree, dated April 22, 1958.
Since a good deal of argument centers round the
construction of this Court’s decree, dated April 22, 1958,
it will be pertinent to extract here the material part of
that decree.
“(a) That the appellant herein do deposit within
thirty days of the receipt in the decree of this Court
the sum of Rs. 85,000/- in the District Court of
Trichur and that on the aforesaid amount being
deposited the said District Court of Trichur do
forthwith give notice thereof to the respondents
abovenamed and that on the aforesaid amount of Rs.
85,000/- being deposited respondents Nos. 2 and 3
herein, namely S. M. R. Solaiyappa Chettiar and George
Thatil do within 30
64
days from the date of receipt of the notice of the said
deposit execute and register a sale deed in favour of
the plaintiff (Appellant) in respect of the suit
property.
(b) ………………
(c) That the respondents above-named do pay to the
appellant the cost incurred by him in the Court of the
District Judge, Trichur, in Suit No. 183 of 1950 and
the costs incurred by him in the former High Court
of………..
(d) ………………
(e) …. AND THIS COURT DOTH FURTHER DE CLARE that
appellant shall be entitled to:
(a) mesne profits against such of the respondents
(Is may have been in possession of the property except
during the period that the property was in the custody
and management of the receiver appointed by the trial
court;
(b) the net sum collected by the Receiver during
his management; and
(c) credit for all such sums as he may have
advanced to the receiver under the direction of the
Court for the management of property;
AND THIS COURT DOTH ACCORDINGLY DIRECT that the
trial Court do hold an enquiry about the mesne pro fits
and such sums as may be found to be due on inquiry
against the second and third respondents in respect of
the mesne profits be deducted from the amount to be
deposited in cash in the Court by the appellant
aforesaid in accordance with clause (a) supra, and do
direct the payment of the remaining amount, if any, to
the third respondent (defendant 2) who is the assignee
of the second respondent (defendant 1) pendent lite;”
(Emphasis supplied)
On September 12, 1958, the plaintiff filed an
application in the District Court for execution of the said
decree, dated April 22, 1958″ in respect of all the reliefs
allowed thereunder. After the decree-holder had deposited a
sum of Rs. 85,000/-, as directed in the decree, the
execution application was eventually made over to the
Subordinate Judge, Trichur. As per the decree, the sale deed
was executed on March 16″ 1959! by the Court on behalf of
defendants 1 and 2 in favour of
65
the plaintiff and the possession of the property in
consequence thereof was delivered to him on March 29. 1959.
Thereafter, the plaintiff filed Miscellaneous Petition
No. 229/60 in the Trial Court. Before the Court, defendant 3
on November 11, 1958, filed objections that he was not
iliability for mesne profits, as he was never in possession
and occupation of the suit property. He further contended
that his liability for mesne profits, if any. was limited to
the period commencing from the date of notice of the deposit
in Court of the amount of Rs. 85,000/- till the date of
delivery of possession and that the plaintiff was not
entitled to interest on mesne profits, or on costs by way of
restitution. Defendant 2 contended that he was not liable,
for mesne profits as he had never been in possession and
management of the suit property, and that the entire
liability, if at all any, for mesne profits was that of
defendant 3, who had been in exclusive possession of the
property.
On December 22, 1962, the court of first instance
passed orders in respect of mesne profits, costs etc. It
found that defendant 1, 2 and 3 were jointly and severally
liable to the plaintiff for a sum of Rs. 10,162.67 on
account of costs of the Trial Court and the Supreme Court.
The Court further found that defendant 2 was separately
liable to pay to the plaintiff, a sum of Rs. 11,941.63
consisting of three items, namely, Rs. l, 239.02 on account
of costs recovered by defendant 2 from decree-holder and
payable by former with interest by way of restitution, Rs.
2,577.01 on account of-costs in the High Court, and Rs.
8125/-on account of mesne profits from the factory from the
date of suit till date of Ex. D-3. The aggregate! amount
under these two heads came to Rs. 23,103.70, which was
allowed to be set off against Rs. 85,000/- deposited in
Court by the plaintiff and the balance was directed to be
paid to the second defendant’s mother, his assignee.
Apart from the sum of Rs. 10,162.67 jointly and
severally payable by the third and second respondents, the
District Court found that the third defendant was separately
liable to pay the plaintiff a sum of Rs. l 57.086.81
consisting of these items:
(a) Rs. 7,298.l0, by way of restitution on account of
costs recovered from the decree-holder including interest
thereon;
(b) Rs. 39,975.00 Rent deposited and withdrawn by him
together with interest thereon;
(c) Rs. 1,177.00, costs payable by him for the appeal
in the High Court; and
66
(d) Rs. 1,08,636.71 net mesne profits payable by him
from April 1, 1963 to the date of delivery of possession,
during which period, he was found to be in possession and
management. After giving credit of a sum of Rs. 48,321
deposited by the third defendant in Court on March 9, 1959,
a net sum of Rs. 1,08,765.81 was directed to be realised by
the plaintiff from the estate of defendant 3 in the hands of
his legal representative (appellant in C.A. 466/69). By the
same order, the Court dismissed Misc. Petition No. 229/60
that had been filed by the plaintiff for determination of
the extent of waste committed upon the property by defendant
3.
Aggrieved by that Judgment and Order, Lucy Kochivareed,
wife of defendant 3, as well as the plaintiff and the second
defendant, preferred appeals in the High Court of Kerala. By
a common judgment, dated August 6, 1968, the High Court
partly allowed the appeals filed respectively, by the
plaintiff and the legal representatives of defendant 3; but
dismissed the appeal (A.S. 248/63) filed by defendant 2. The
High Court,, inter alia, affirmed the finding of the Trial
Court that the third defendant was in sole and exclusive
possession of the suit property during the period in
question. The Trial Court’s findings with regard to the
quantum of mesne profits per year, were not found satis
factory. The High Court assessed the mesne profits at a flat
rate of Rs. 15,000/- per year and determined the obligations
of the parties accordingly. The High Court further found
that the second and third defendants were jointly and
severally liable to pay Rs. 10,200/- by way of costs, and
the second defendant alone was liable to pay Rs. i 1,000/ by
way of restitution, costs in the High Court and mesne
profits to the plaintiff, and that the aggregate of Rs.
21,200/- be set off against the sum of Rs. 85,000/-
deposited by the plaintiff and the balance be paid to the
mother of defendant 2.
Aggrieved by the judgment, dated August 8, 1968, of the
High Court, Lucy Kochivareed, wife of the deceased defendant
3, has filed Civil Appeal 466 of 1969; while the plaintiff
has preferred Civil Appeal No. 2375 of 1969.
Both the appeals will be disposed of by this common
judgment.
We will first take up Civil Appeal 466 of 1969 filed by
the widow of defendant 3.
The main contention of Mr. K. S. Ramamurthy, learned
counsel for the appellant (Luci Kochivareed), is that if the
decree, dated April 22, 1958, passed by this Court in C.A.
129/56 is properly construed in the
67
light of the material on record and the law on the subject,
then three consequences inevitably follow:
(i) Both defendant 2 and defendant 3 would be deemed to
be in possession of the suit property during the period in
question. The possession of defendant 2 was juridical or
legal possession of an owner, he being the purchaser of the
property from defendant l; while that of defendant 3 was on
actual permissive possession with the consent of defendant
2. Defendant 2 and defendant 3 being in the position of
joint-tort-feasors would be jointly and severally liable for
mesne profits or compensation.
This being the case, the plaintiff was bound to suffer
a set off to the purchase price (Rs. 85,000/-) deposited by
him, against his claim for mesne profits against defendant
3. But after the decree of this Court, the plaintiff in
pursuance of a collusion between him and defendant 2,
allowed the High Court to cancel the security given by
defendant 2 for withdrawal of Rs. 62,900/- out of the
purchase price deposited by the plaintiff. The plaintiff was
thus precluded by his conduct from claim- in that much
amount from defendant 3. After setting off the entire
deposit of Rs. 85,000/-, defendant 3 will be liable only,
for the balance of the mesne profit, jointly with defendant
2.
(ii) The plaintiff’s right to possession of the
property under the decree accrued when he deposited the
price in Court and thereafter obtained the conveyance in his
favour on March 16, 1959. The possession of defendants 2 and
3 as against the plaintiff became wrongful only from the
date on which the conveyance was executed in his favour, at
any rate on the date (September 12, 1958) on which he fully
deposited the price in Court.
(iii) The period for which the mesne profits have been
awarded., is to be restricted to the one permissible under
Order XX Rule 12(1) (c) of the Code of Civil Procedure. Such
period in the light of this provision would be the one
commencing from the date the institution of the suit and
ending on the expiration of three years from the date of the
decree of the Trial Court. The expression “the decree”,
occurring in the aforesaid clause (according to the counsel)
means the decree of the Trial Court. In other words, the
maximum period for which mesne profits can be awarded-and
would be deemed to have been awarded-is three years from the
date of the decree of the Trial Court; and the Courts below
were wrong in awarding mesne profits for a period of more
than six years, commencing from the date of the institution
of the suit till the delivery of possession in accordance
with the decree of this Court to the plaintiff.
68
Upon the above premises, Mr. Ramamurthy maintains that
the plain tiff will not be entitled to any mesne profits
because his right to possession did not accrue within three
years of the date of the decree of the Trial Court. Such a
right, according to the counsel, accrued to the plaintiff
only on April 22, 1958 when his amended suit for specific
performance and possession and future mesne profits was
decreed. In the alternative, as already noticed, counsel
submits that mesne profits could not be awarded for any
period prior to the date (September 12, 1958) on which the
plaintiff deposited the price, because his right to
possession accrued on that date and not earlier
In support of his contentions, Shri Ramamurthy has
cited a decision of this Court in Chitturi Subbanna v.
Kudapa Subbanna & Ors.(l) He has also referred to some other
rulings, wherein some general principles have been
enunciated as to who can be made liable for mesne profits.
On the other hand, Mr. Govindan Nair, learned counsel
for the plaintiff, submits that the. decree” dated April 22,
1958 of this Court is crystal-clear. There is no ambiguity
in it. Read in the light of this Court’s judgment, it
unmistakably shows that whosoever, out of the defendants
was/were in actual possession, would be liable for the mesne
profits from the date of the suit till the delivery of
possession. It is pointed out that in the courts below, the
positive stand taken by defendant 3 was that he was never in
possession of the Suit property and therefore, was not
liable for mesne profits. It was never the case of defendant
3 that he was in derivative possession under defendant 2.
Counsel submits that defendant 3 should not be allowed to
take a stand diametrically opposed to the one taken by him
in the courts below. It is further submitted that the decree
of this Court was final decree so far as it laid down that
the liability for the mesne profits shall be fixed on the
basis of the defendant found in actual possession of the
suit property.
Before dealing with the contentions canvassed on both
sides, it will be profitable to notice the general
principles relating to the liability formesne profits.
Mesne profits being in the natural of damages, no
invariable rule governing their award and assessment in
every case, can be laid down and “the Court may mould it
according to the justice of the case”. Even so, one broad
basic principle governing the liability for mesne profits is
discernible from Section 2(12) of the Code of Civil
Procedure which defines ‘mesne profits’ to mean “those
profits which the person in wrongfil possession of property
actually received or might with ordinary
(1) [1965] 2 S.C.R. 661.
69
diligence have received therefrom together with interest on
such profits, but shall not include profits due to
improvements made by the person in wrongful possession”.
From a plain reading of this definition, it is clear that
wrongful possession of the defendant is the very essence of
a claim for mesne profits and the very foundation of the
defendant’s liability therefor. As a rule, therefore,
liability to pay mesne profits goes with actual possession
of the land. That is to say, generally, the person in
wrongful possession and enjoyment of the immovable property
is liable for mesne profits. But, where the plaintiff’s
dispossession, or his being kept out of possession can be
regarded as a joint or concerted act of several persons,
each of them who participates in the commission of that act
would be liable for mesne profits even though he was not in
actual possession and the profits were received not by him
but by some of his confederates.
ln such a case where the claim for mesne profits is
against several trespassers who combined to keep the
plaintiff out of possession; it is open to the Court to
adopt either of the two courses. It may by its decree hold
all such trespassers jointly and severally liable for mesne
profits, leaving them to have their respective rights
adjusted in a separate suit for contribution; or, it may, if
there is proper material before it, ascertain and apportion
the liability of each of them on a proper application made
by the defendant during the same proceedings.
Another principle, recognised by this Court in Chitturi
Subbanna v. Kudapa Subbanna (ibid) ‘is that a decree under
Order XX Rule 12 of the Code, directing enquiry into mesne
profits, howsoever expressed, must be construed to be a
decree directing the enquiry in conformity with the
requirements of Rule 12(1)(c), so that the decree-holder is
not entitled to mesne profits for a period (commencing from
the date F of the institution of the suit) extending beyond
three years from the date of the preliminary decree.
Again, possession through another, such as a tenant,
may be sufficient to create liability for mesne profits if
‘such possession is wrongful.
We will now deal with the contentions advanced by Mr.
Ramamurthy, in the light of these principles.
The first argument, as already noticed, is that both
defendants 2 and 3 were in possession of the suit property
during the period in question. It is contended that the
possession of defendant 2 was the legal possession of an
owner while that of defendant 3 derivative possession of a
lessee or licensee under the former.
70
A perusal of the decree dated April 22, 1958, of this
Court, extracted in a foregoing part of this judgment,
show’s that it was a composite decree, partly final, partly
preliminary. It was final in so far as it granted the
reliefs of specific performance and possession on deposit of
the price by the plaintiff. It was preliminary inasmuch it
directed an inquiry with regard to the assessment of mesne
profits, and as to who out of the defendants was/were liable
for payment of those mesne profits. But, it laid down in no
uncertain terms that only such of the defendants would be
liable for mesne profits “as may have been in possession of
the property”. Construed in conformity with the legal
principles enunciated above, this direction in the decree,
means that only the defendant or defendants found in actual
possession and enjoyment of the property would be liable for
mesne profits.
In the courts below, at no stage, defendant 3 took up
the position that he was in derivative possession of the
property under defendant 2. On the contrary, in his
objection-petition filed before the District Court on
November 11, 1958, defendant 3 emphatically asserted that he
“is not liable for mesne profits for the suit property as he
was never in pos session and occupation of the same”.
Defendant 3 further vehemently pleaded that it was never
intended at any time that he (defendant 3) “should be a
lessee of the property nor was he a lessee at any time”. In
para 3 of his petition, defendant 3 further pleaded that the
purchase of the factory was made in favour Of defendant 2,
with money advanced by him (defendant 3), and the intention
then was that the suit property should be worked by
defendant 2 with funds advanced by defendant 3 who should be
“recouped from the profits accrued from the proper-y or
otherwise in respect of the purchase money advanced by him
as also the advances for the working expenses”. In paragraph
5, he further pleaded that “in any event he cannot be held
liable for any amount more than what is stipulated in the
lease deed (EX. I) in favour of Neelakantha Iyer”.
There is not even a whisper in the pleadings that
defendant 2 and defendant 3 were joint-tort-feasors and
therefore, jointly and severally liable for mesne profits.
The plea now pressed into argument by Mr. Ramamurthy is
thus a complete somersault of the position that had been
taken in the courts below.
The Court of first instance after an exhaustive.
consideration of the overwhelming evidence, oral and
documentary, on record reached the finding that ever since
March 5, 1951, defendant 3 was, while defendant
71
2 was not, in actual control, management and possession of
the suit property, and therefore, in terms of the decree
dated April 22, 1958 of this Court, defendant 3 alone would
be liable for mesne profits of the property. In appeal, the
High Court found that “the Court below was perfectly right
in holding that the 3rd defendant was in sole and exclusive
possession during the period in question and it is idle for
him 3 to pretend otherwise”. Indeed, the third defendant
himself had repeatedly admitted in various documents that he
was in possession. In his application, Ex 77(a), made in the
Court of first instance, on March 7, 1951, the defendant
admitted that he was in possession in pursuance of
assignment of lease made. in his favour by Neelakantha Iyer
on March 5, 1951. This lease has been found by this Court to
be a sham transaction. Further, defendant 3 on March 21,
1951, executed a lease in favour of the Receiver appointed
by the Court. In this cease also, he admitted that he had
been in possession of the property since March 5, 1951. The
lease executed by defendant 3 in favour of the Receiver
ensured for a period of two years on a yearly rental of Rs.
15,000/- and he deposited Rs. 30,000/’- therefor as rental
in Court. Then, the Bank accounts of the factory (except for
a short period from March 25, 1953 to November 11, 1954)
were throughout in the name of the third defendant as lessee
thereof.
We have absolutely no reason to differ from this
concurrent finding of the courts below that the third
defendant was in sole, actual possession and control of the
suit property from March 3, 1951, when he obtained the
alleged assignment of the lease in his favour from
Neelakantha Iyer. In terms of the aforesaid decree of this
Court, therefore, defendant 3 alone is liable for mesne
profits in respect of the period he was in p(excepting
(excepting the period during which the property was under he
management of the Court Receiver).
As regards the appellant’s contention that the amount
deposited by the plaintiff towards the price should have
been set off against the liability of defendant 3 for mesne
profits, it may be observed that, there is nothing in the
decree, dated April 22, 1958, of this Court which say’s that
such a set off should be allowed. On the contrary, it
allowed deduction of the amounts found due against defendant
1 and defendant 2 from the deposit of Rs. 85,000/- to be
made by the plaintiff towards the price, and further
directed that after such deduction, the balance of such
deposit made by the plaintiff” if any, shall be paid “to the
third 1 respondent (defendant 2) who is the assignee of the
‘second respondent (defendant l ) pendente lite.”
72
Assuming arguendo, that both defendants 2 and 3 were,
liable for mesne profits jointly and severally, then also,
the plaintiff could, at his option, recover the whole of the
amount of mesne profits from either of them; and how such
inter se liability of the defendants was to be adjusted or
apportioned, was a matter between the defendants only. The
plaintiff was not bound to suffer a set off in favour of
defendant 3, merely because defendant 2 or his assignee
withdrew the price deposited by the plaintiff without
furnishing any security for its refund or adjustment towards
the liability of defendant 3, there being no evidence,
whatever, on record to show that such withdrawal was the
result of any collusion or conspiracy between the plaintiff
and defendant 2 against defendant 3.
Assuming further, for the sake of argument, that
defendant 2 and defendant 3 were’ both acting in concert to
keep the plaintiff out of pos session, it was not necessary
for the courts below to decide the issue with regard to
apportionment of liability and its adjustment between
defendants 2 and 3. Indeed, the adoption of such a course
would have militated against the finding that defendant 3
alone was in exclusive possession and control of the suit
property ever since March 5, 1951.
We therefore, negative the first contention of the
appellant.
This takes us to the second and third points pressed
into argument by Mr. Ramamurthy. It is to be noted that
defendant 3 entered into possession of the suit property
under an assignment of sham lease from Neelkantha Iyer on
March 5, 1951 during the pendency of the plaintiff’s suit
which was institute`d on August 25, 1950. The plaintiff had
deposited Rs. 50,000/- some time after the presentation of
the plaint Under the agreement for sale, dated May 22, 1950,
made by defendant 1 in favour of the plaintiff, the total
sale consideration was fixed at Rs. 90,003/-. Out of it, Rs.
5,003/- had been paid to defendants on the very date of the
agreement. It was further stipulated that out of the
balance, Rs. 55.000/- would be paid by the plaintiff-
purchaser at the time of the registration of the sale deed
which was to be executed and registered on or before July
15, 1950. It was further stipulated that on payment of the
further sum of Rs. 50,000/-, the plaintiff would be entitled
to be put in possession of the suit property. Thus, when
defendant 3 entered into possession, first, under the garb
of an assignee of a sham lease from Neelakantha Iyer, and
then further purchased the property with his own funds in
favour of defendant 2, pendente lite, he was fully conscious
that he was purchasing a litigation. His possession was,,
therefore, wrongful qua the plaintiff from its very
inception
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The material part of Rule 12(1) of Order XX of the Code
of Civil procedure, provides:
“Where a suit is for the recovery of possession of
immoveable property and for rent or mesne profits, the
Court may pass a decree-
(a) for the possession of the property;
(b) ……………….
(ba) ………………
(c) directing an inquiry as to rent or mesne
profits from the institution of the suit
until-
(i) the delivery of possession to the
decree-holder,
(ii) the expiration of possession by the
judgment debtor with notice to the
decree-holder through the Court, or
(iii)the expiration of three years from the
date of the decree, whichever event
first occurs.” D
Mr. Ramamurthy argued, if we may say so with respect,
somewhat inconsistently, that the word “decree” in sub-
clause (iii) of clause (c) of the aforesaid rule 12(1),
means the decree for possession and mesne profits which the
trial court ought to have passed, and that in this view of
the matter, the period of three years mentioned in sub-
clause (iii) will be counted from August 28, 1952, the date
of the trial court’s decree, whereby mesne profits at the
reduced rate of Rs. 15,000/- instead of Rs. 30,000/- per
annum claimed by the plaintiff, were awarded. In that view
of the matter, according to the counsel, the plaintiff was
not entitled under the law to get a decree for mesne profits
beyond August 27, 1955. It is pointed out that since the
plaintiff had, as a result of the acceptance of the
defendants’ appeal and dismissal of his suit by the High
Court, withdrawn the deposit of Rs. 50,000/- on August 19,
1953 and he had not redeposited the amount until February g,
1959, he was not then entitled to possession and, in
consequence, to any mesne profits during this period.
The argument is certainly ingenious, but untenable,
being founded on fallacious premises. The period of three
years mentioned in sub-clause (iii) of clause (c) of Rule
12(1) is to be computed from the date of the decree of this
Court, i.e. from April 22, 1958 and it will expire on the
date on which possession was delivered or relinquished by
the defendant in favour of the decree-holder pursuant to
that decree. In other words, the decree mentioned in sub-
clause
6-196SCI/79
74
(iii) of the aforesaid clause (c), would be the appellate
decree, dated April 22, 1958, of this Court. The period of
three years mentioned in the said sub-clause is, therefore,
to be reckoned fro`m April 227 1958. The words “whichever
event first occurs” in sub-c1ause (iii) imply that the
maximum period for which future mesne profits can be
awarded, is three years from the date of the decree for
possession and mesne profits, finally passed. The courts
below, therefore, while holding that defendant 3 was liable
to pay mesne profits for a period of about 6 years
commencing from March 5, 1951/March 21, 195l till the
delivery of possession in September, 1958 (less the period
during which the property was under the management of the
Receiver), were acting in conformity with the law and the
terms of the decree, dated April 22, 1958, of this Court.
We, therefore, reject these contentions, also.
Another contention canvassed by Mr. Ramamurthy was that
the courts below have wrongly disallowed deduction for
interest on the deposit of Rs. 50,000/-, which the plaintiff
had withdrawn on August 19, 1953 and had redeposited on
February 9, 1959. It appears to us that in all fairness, the
defendant is entitled to deduction for interest for the
period from August 19, 1953 to February 9, 1959 on the sum
of Rs. 50,000/-, which, at ,6 per cent per annum, after
deducting the interest for the period during which the
property was under the management of the Receiver.
(According to the agreed calculations made the counsel for
the parties it works out to Rs. 14,000/- approximately. We
see no reason why deduction of this amount be not allowed
from the mesne profits assessed against defendant 3.
We will now take up Civil Appeal No. 2375 of 1969 filed
by the plaintiff
Mr. Govindan Nair, learned counsel for the plaintiff-
appellant. has contended-
(i) that mesne profits ought to have been awarded at
the Rate of Rs. 25,000/- per annum. The High Court was in
error in awarding the same at the rate of Rs. 15,000/-;
(ii) that the High Court was not justified in reducing
the rate on interest from 6 per cent per annum awarded by
the Trial Court to 4 per cent per annum;
(iii) that interest at 6 per cent per annum was rightly
awarded by the court of first instance on the sum of Rs.
30,000/-, which was two years rental paid by defendant 3,
under the lease taken from the Receiver for the period from
August 19, 1953 to March 9, 1959, and the High Court was in
error in disallowing that interest; and
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(iv) that the Courts below were not justified in
denying costs to the plaintiff in the inquiry as to mesne
profits or in appeal arising therefrom.
We will deal with these contentions ad seriatim.
Contention (i):
In this connection, Mr. Nair drew our attention to
Exhibits D-8 to D-15, which are Balance Sheets and Profit &
Loss Accounts of the Sivakami Tile Works, relating to the
period from March 31, l953 to November S, 1958. These
documents were prepared at the instance of the third
defendant for the purposes of his Income-tax returns. The
High Court found that these Balance Sheets and Profit & Loss
Accounts prepared for Income-tax puropses were suspicious
documents and by themselves were not proof of the profits
derived. Mr. Nair has no quarrel with this finding. He,
however, contended That the High Court ought to have worked
out the real profits by taking into account the quantity of
clay purchased according to these documents. In this
connection, it is submitted that according to the evidence
produced on the side of the plaintiff about five candies of
clay are required for producing 1000 small tiles and even
according to the evidence of the second defendant as C.P.W.
2, 51 to 6 candies are required for 1000 small tiles.
We are not impressed by this argument. The High Court
has fully considered the evidence produced on the side of
the plaintiff. It noted that the plaintiff, also, had not
produced any cogent evidence to show what were the profits
earned by him by working the factory in dispute for the
period of one year preceding the date of his examination. By
the time plaintiff appeared in the witness-box, he had been
working this factory for about one year.
In the alternative, Mr. Nair submitted that even during
the period of two years when the Receiver was there and
defendant 3 worked the factory as a lessee under the former,
he had made a profit of Rs. 22,000/-. Our attention has,
also been drawn to the document (Ex. D-8), that the income
for the first year ending 1952 was Rs. 20,000/-. The point
pressed into argument is that the highest profit made by him
according to these Balance Sheets and Profit & Loss Accounts
during any year by defendant 3, should be taken as the rate
for calculating the mesne profits.
The contention does not appear to tenable. Once it was
found that these Balance Sheets and Profit & loss Accounts
were not reliable, nor the evidence produced by the
plaintiff, the only reliable evidence left on the file was
the rate at which the factory was leased out
76
by the Receiver to defendant 3. When the lease for the
second year was granted to defendant 2 by the Receiver on a
rental of Rs. 15,000/-, the plaintiff should have objected
that the rent was less or he could himself take the lease on
paying higher rent. The High Court was, therefore, not wrong
in holding that this rent fixed under the lease granted by
the Receiver represented the real rental value of the
factory during the year in question and in the absence of
any other reliable evidence for assessing the profits
actually earned or which, with due diligence, could have
been earned the mesne profits may reasonably be fixed at Rs.
15,000/- per annum.
We, therefore, negative the first contention of Mr. Nair,
Contention (ii):
The Trial Court had awarded interest at the rate of 6
per cent per annum on the mesne profits assessed by it. The
High Court reduced that rate to 4 per cent, with the
observation that having regard to all the circumstances of
the case, including that the plaintiff had the use of the
sum of Rs. 85,000/- which he was to pay towards the price of
the property a rate of 4 per cent per annum would be
reasonable and just.
Even Mr. Ramamurthy has not been able to support this
reduction in the rate of interest. It was after a long drawn
out litigation that the plaintiff got possession of the
property. The Trial Court, therefore rightly awarded the
interest at the rate of 6 per cent per annum.
We, therefore, accept this contention and direct that
interest as part of the mesne profits assessed in this case,
shall be payable at the rate of 6 per cent per annum upto
March 29, 1959 when possession was delivered in pursuance of
the decree of this Court, to the plain tiff and further
interest at 6 per cent per annum on the outstanding amount
shall be payable till the date of payment.
Contention (iii):
A sum of Rs. 30,000/-, being the rent collected by the
Receiver from the third defendant, was deposited in Court.
This amount was withdrawn by the third defendant on August
19, 1953 following the dismissal of the plaintiff’s suit, by
the High Court. When the plaintiff’s appeal succeeded in
this Court and a decree was passed in his favour by this
Court, then defendant 3 redeposited the sum of Rs. 30,000/-,
only on March 9, 1959. The Trial Court had awarded interest
at 6 per cent per annum on this amount of Rs. 30,000/- for
the period from August 19, 1953, the date on which the
defendant withdrew that deposit, until March 9, 1959, the
date when he redeposited the sum. The High Court has
disallowed interest on this account
77
for the aforesaid period on the ground “that the Supreme
Court does not award that”.
We are unable to agree with this reasoning. It
overlooked the fact that interest on the sum of Rs. 30,000/-
was being claimed under Section 144 of the Code of Civil
Procedure, by way of restitution. Section 144 in terms says
that for the purpose of the restitution, the Court may make
any orders, including orders for the payment of interest,
damages, compensation and mesne profits which are properly
consequential on variation or reversal of the decree. There
is nothing in the decree, dated April 22, 1958, of this
Court which expressly or by implication prohibited the
payment of interest on this sum, by way of restitution. The
Trial Court had rightly allowed interest on amount for this
period at 6 per cent per annum, and we restore the same
direction.
Contention (iv):
The argument is that costs have been unfairly denied to
the plaintiff by the Courts below. We do not agree. The
Courts below could not have been oblivious of’ the fact that
defendant 3 has since died and the respondent is his widow.
We, therefore, do not want to interfere with the discretion
of the Courts below in the matter of costs.
For the foregoing reasons, we, partly allow the
plaintiff’s appeal (Civil Appeal No. 2375 of 1969) to the
extent indicated above, with proportionate costs. We will
dismiss the defedant’s appeal (Civil Appeal No. 466 of 1969)
except to the extent that the defendant shall be allowed a
set off in the sum of Rs. 14,000/-, being the interest on
the sum Or Rs. 50,000/- for the period from August 19, 1953
(the date of the withdrawal of the deposit by the plaintiff)
to the date when he redeposited it. Interest on the
outstanding amount at 6 per cent per annum shall be payable
till the date of payment. In Civil Appeal 466 of 1969,
however, the parties will bear their own costs in this
Court.
CA 2375/69 allowed
in part. CA 466/69
S.R. dismissed with modifications.
78