CASE NO.: Appeal (civil) 7988 of 2004 PETITIONER: M/s. Atma Ram Properties (P) Ltd. RESPONDENT: M/s. Federal Motors Pvt. Ltd. DATE OF JUDGMENT: 10/12/2004 BENCH: CJI R.C. LAHOTI & G.P. MATHUR JUDGMENT:
J U D G M E N T
[Arising out of S.L.P.(C) No.6415 of 2002]
R.C. Lahoti, CJI
Leave granted.
The suit premises are non-residential commercial premises
admeasuring approximately 1000 sq. ft. and situated in
Connaught Circus, New Delhi. The premises are owned by the
appellant and held on tenancy by the respondent on a monthly
rent of Rs.371.90p. per month. The tenancy had commenced
sometime in the year 1944 and it appears that ever since then
the rent has remained static. Admittedly, the provisions of the
Delhi Rent Control Act 1958, (hereinafter ‘the Act’, for short) are
applicable to the premises.
Sometime in the year 1992, the appellant initiated
proceedings for the eviction of the respondent on the ground
available under Clause (b) of sub-Section (1) of Section 14 of
the Act alleging that the respondent had illegally sublet the
premises to M/s. Jay Vee Trading Co. Pvt. Ltd. and the sub-
tenant was running its showroom in the premises. Vide order
dated 19.3.2002, the Additional Rent Controller, Delhi held the
ground for eviction made out and ordered the respondent to be
evicted. The respondent preferred an appeal under Section 38 of
the Act. By order dated 12.4.2001, the Rent Control Tribunal
directed the eviction of the respondent to remain stayed but
subject to the condition that the respondent shall deposit in the
Court Rs.15,000/- per month, in addition to the contractual rent
which may be paid directly to the appellant. The deposits were
permitted to be made either in cash or by way of fixed deposits
in the name of the appellant and directed to be retained with the
Court and not permitted to be withdrawn by either party until
the appeal was finally decided. Raising a plea that the
respondent could not have been directed during the pendency of
the proceedings at any stage to pay or tender to the landlord or
deposit in the Court any amount in excess of the contractual rate
of rent, the respondent filed a petition under Article 227 of the
Constitution putting in issue the condition as to deposit
Rs.15,000/- per month imposed by the Tribunal. By order dated
12.2.2002, which is impugned herein, the learned single Judge
of the High Court has allowed the petition and set aside the said
condition imposed by the Tribunal. The effect of the order of the
High Court is that during the pendency of appeal before the
Tribunal the respondent shall continue to remain in occupation of
the premises subject to payment of an amount equivalent to the
contractual rate of rent. Feeling aggrieved, the landlord
(appellant) has filed this appeal by special leave.
Ordinarily this Court does not interfere with discretionary
orders, more so when they are of interim nature, passed by the
High Court or subordinate Courts/Tribunals. However, this
appeal raises an issue of frequent recurrence and, therefore, we
have heard the learned counsel for the parties at length.
Landlord-tenant litigation constitutes a large chunk of litigation
pending in the Courts and Tribunals. The litigation goes on for
unreasonable length of time and the tenants in possession of the
premises do not miss any opportunity of filing appeals or
revisions so long as they can thereby afford to perpetuate the
life of litigation and continue in occupation of the premises. If
the plea raised by the learned senior counsel for the respondent
was to be accepted, the tenant, in spite of having lost at the
end, does not loose anything and rather stands to gain as he has
enjoyed the use and occupation of the premises, earned as well
a lot from the premises if they are non-residential in nature and
all that he is held liable to pay is damages for use and
occupation at the same rate at which he would have paid even
otherwise by way of rent and a little amount of costs which is
generally insignificant.
Shri K. Ramamurthy, the learned senior counsel for the
appellant submitted that once a decree or order for eviction has
been passed, the tenant is liable to be evicted and if he files an
appeal or revision and opts for retaining use and occupation of
the premises, he should be prepared to compensate the landlord
by paying such amount as the landlord would have been able to
earn in the event of the premises being vacated and, therefore,
the superior court, passing an order of stay, acts well within its
discretionary jurisdiction by putting on terms the appellant who
seeks an order of stay. On the other hand, Shri Ranjit Kumar,
the learned senior counsel appearing for the respondent,
defended the order of the High Court by raising several pleas
noticed shortly hereinafter.
The order of eviction passed by Rent Controller is
appealable to the Rent Control Tribunal under Section 38 of the
Act. There is no specific provision in the Act conferring power on
the Tribunal to grant stay on the execution of the order of
eviction passed by the Controller, but sub-Section (3) of Section
38 confers the Tribunal with all the powers vested in a Court
under the Code of Civil Procedure, 1908 while hearing an appeal.
The provision empowers the Tribunal to pass an order of stay by
reference to Rule 5 of Order 41 of the Code of Civil Procedure
1908 (hereinafter ‘the Code’, for short). This position was not
disputed by the learned senior counsel appearing for either of
the parties.
Sub-Rule (1) and (3) of Rule 5 of Order 41 of the Code
read as under:-
“R.5 Stay by Appellate Court
(1) An appeal shall not operate as a stay
of proceedings under a decree or order
appealed from except so far as the Appellate
Court may order, nor shall execution of a
decree be stayed by reason only of an appeal
having been preferred from the decree; but the
Appellate Court may for sufficient cause order
stay of execution of such decree.
Xxx xxx xxx xxx
(3) No order for stay of execution shall
be made under sub-rule (1) or sub-rule (2)
unless the court making it is satisfied ___
(a) that substantial loss may result to the
party applying for stay of execution
unless the order is made;
(b) that the application has been made
without unreasonable delay; and
(c) that security has been given by the
applicant for the due performance of
such decree or order as may ultimately
be binding upon him.
xxx xxx xxx xxx”
It is well settled that mere preferring of an appeal does not
operate as stay on the decree or order appealed against nor on
the proceedings in the court below. A prayer for the grant of
stay of proceedings or on the execution of decree or order
appealed against has to be specifically made to the appellate
Court and the appellate Court has discretion to grant an order of
stay or to refuse the same. The only guiding factor, indicated in
the Rule 5 aforesaid, is the existence of sufficient cause in favour
of the appellant on the availability of which the appellate Court
would be inclined to pass an order of stay. Experience shows
that the principal consideration which prevails with the appellate
Court is that in spite of the appeal having been entertained for
hearing by the appellate Court, the appellant may not be
deprived of the fruits of his success in the event of the appeal
being allowed. This consideration is pitted and weighed against
the other paramount consideration: why should a party having
succeeded from the Court below be deprived of the fruits of the
decree or order in his hands merely because the defeated party
has chosen to invoke the jurisdiction of a superior forum. Still
the question which the Court dealing with a prayer for the grant
of stay asks to itself is: Why the status quo prevailing on the
date of the decree and/or the date of making of the application
for stay be not allowed to continue by granting stay, and not the
question why the stay should be granted.
Dispossession, during the pendency of an appeal of a party
in possession, is generally considered to be ‘substantial loss’ to
the party applying for stay of execution within the meaning of
clause (a) of sub-rule (3) of Rule 5 of Order 41 of the Code.
Clause (c) of the same provision mandates security for the due
performance of the decree or order as may ultimately be passed
being furnished by the applicant for stay as a condition
precedent to the grant of order of stay. However, this is not the
only condition which the appellate Court can impose. The power
to grant stay is discretionary and flows from the jurisdiction
conferred on an appellate Court which is equitable in nature. To
secure an order of stay merely by preferring an appeal is not the
statutory right conferred on the appellant. So also, an appellate
Court is not ordained to grant an order of stay merely because
an appeal has been preferred and an application for an order of
stay has been made. Therefore, an applicant for order of stay
must do equity for seeking equity. Depending on the facts and
circumstances of a given case an appellate Court, while passing
an order of stay, may put the parties on such terms the
enforcement whereof would satisfy the demand for justice of the
party found successful at the end of the appeal. In South
Eastern Coalfields Ltd. Vs. State of M.P. & Ors., (2003) 8
SCC 648, this Court while dealing with interim orders granted in
favour of any party to litigation for the purpose of extending
protection to it, effective during the pendency of the
proceedings, has held that such interim orders, passed at an
interim stage, stand reversed in the event of the final decision
going against the party successful in securing interim orders in
its favour; and the successful party at the end would be justified
in demanding compensation and being placed in the same
situation in which it would have been if the interim order would
not have been passed against it. The successful party can
demand (a) the delivery to it of benefit earned by the opposite
party under the interim order of the High Court, or (b)
compensation for what it has lost, and to grant such relief is the
inherent jurisdiction of the Court. In our opinion, while granting
an order of stay under Order 41 Rule 5 of the CPC, the appellate
court does have jurisdiction to put the party seeking stay order
on such terms as would reasonably compensate the party
successful at the end of the appeal in so far as those
proceedings are concerned. Thus, for example, though a
decree for payment of money is not ordinarily stayed by the
appellate Court, yet, if it exercises its jurisdiction to grant stay in
an exceptional case it may direct the appellant to make payment
of the decretal amount with interest as a condition precedent to
the grant of stay, though the decree under appeal does not
make provision for payment of interest by the judgment-debtor
to the decree-holder. Robust commonsense, common knowledge
of human affairs and events gained by judicial experience and
judicially noticeable facts, over and above the material available
on record – all these provide useful inputs as relevant facts for
exercise of discretion while passing an order and formulating the
terms to put the parties on. After all, in the words of Chief
Justice Chandrachud, speaking for the Constitution Bench in
Olga Tellis and Ors. Vs. Bombay Municipal Corporation and
Ors. (1985) 3 SCC 545, – “commonsense which is a cluster of
life’s experiences, is often more dependable than the rival facts
presented by warring litigants”.
Shri Ranjit Kumar, the learned senior counsel for the
respondent, submitted that during the pendency of the appeal
the tenant-appellant cannot be directed to pay any amount over
and above the amount of contractual rent unless and until the
decree or order of eviction has achieved a finality because, in
view of the protection of rent control legislation enjoyed by the
tenant, he shall continue to remain a tenant and would not
become a person in unlawful possession of the property until the
decree has achieved a finality from the highest forum upto which
the litigation is pursued. Reliance was placed on the decision of
this Court in Smt. Chander Kali Bai & Ors. Vs. Shri Jagdish
Singh Thakur & Anr., (1977) 4 SCC 402, followed in Vashu
Deo Vs. Balkishan, (2002) 2 SCC 50. This submission raises
the following two issues:- (i) in respect of premises enjoying the
protection of rent control legislation, when does the tenancy
terminate; and (ii) upto what point of time the tenant is liable to
pay rent at the contractual rate and when does he become liable
to pay to the landlord compensation for use and occupation of
the tenancy premises unbound by the contractual rate of rent?
Under the general law, and in cases where the tenancy is
governed only by the provisions of Transfer of Property Act,
1882, once the tenancy comes to an end by determination of
lease under Section 111 of the Transfer of Property Act, the right
of the tenant to continue in possession of the premises comes to
an end and for any period thereafter, for which he continues to
occupy the premises, he becomes liable to pay damages for use
and occupation at the rate at which the landlord could have let
out the premises on being vacated by the tenant. In the case of
Chander Kali Bai & Ors. (supra) the tenancy premises were
situated in the State of Madhya Pradesh and the provisions of
the M.P. Accommodation Control Act, 1961 applied. The suit for
eviction was filed on 8th March 1973 after serving a notice on the
tenant terminating the contractual tenancy w.e.f. 31st December
1972. The suit came to be dismissed by the trial Court but
decreed in first appeal decided on 11th August, 1975. One of the
submissions made in this Court on behalf of the tenant-appellant
was that no damages from the date of termination of the
contractual tenancy could be awarded; the damages could be
awarded only from the date when an eviction decree was
passed. This Court took into consideration the definition of
tenant as contained in Section 2(i) of the M.P. Act which included
“any person continuing in possession after the termination of his
tenancy” but did not include “any person against whom any
order or decree for eviction has been made”. The court,
persuaded by the said definition, held that a person continuing
in possession of the accommodation even after the termination
of his contractual tenancy is a tenant within the meaning of the
M.P. Act and on such termination his possession does not
become wrongful until and unless a decree for eviction is passed.
However, the Court specifically ruled that the tenant continuing
in possession even after the passing of the decree became a
wrongful occupant of the accommodation. In conclusion the
Court held that the tenant was not liable to pay any damages or
mesne profits for the period commencing from 1st January 1973
and ending on 10th August 1975 but he remained liable to pay
damages or mesne profits from 11th August 1975 until the
delivery of the vacant possession of the accommodation. During
the course of its decision this Court referred to a decision of
Madhya Pradesh High Court in Kikabhai Abdul Hussain Vs.
Kamlakar, 1974 MPLJ 485, wherein the High Court had held
that if a person continues to be in occupation after the
termination of the contractual tenancy then on the passing of the
decree for eviction he becomes a wrongful occupant of the
accommodation since the date of termination. This Court opined
that what was held by the Madhya Pradesh High Court seemed
to be a theory akin to the theory of “relation back” on the
reasoning that on the passing of a decree for possession, the
tenant’s possession would become unlawful not from the date of
the decree but from the date of the termination of the
contractual tenancy itself. It is noteworthy that this Court has
not disapproved the decision of the Madhya Pradesh High Court
in Kikabhai Abdul Hussain’s case but distinguished it by
observing that the law laid down in Kikabhai Abdul Hussain’s
case was not applicable to the case before it in view of the
definition of ‘tenant’ as contained in the M.P. Act and the
provisions which came up for consideration of the High Court in
Kikabhai Abdul Hussain’s case were different.
Reliance, by the learned counsel for the respondent, on the
case of Vashu Deo (supra) is misconceived, inasmuch as, in
that case the Court was dealing with the rule of estoppel of
tenant for holding that the tenant was estopped from disputing
the title of his landlord so long as he continued in possession of
the tenancy premises and until he had restored the landlord into
possession.
In Shyam Sharan Vs. Sheoji Bhai & Anr., (1977) 4 SCC
393, this Court has upheld the principle that the tenant
continuing in occupation of the tenancy premises after the
termination of tenancy is an unauthorized and wrongful occupant
and a decree for damages or mesne profits can be passed for the
period of such occupation, till the date he delivers the vacant
possession to the landlord. With advantage and approval, we
may refer to a decision of the Nagpur High Court. In
Bhagwandas Vs. Mst. Kokabai, AIR 1953 Nagpur 186, the
learned Chief Justice of Nagpur High Court held that the rent
control order, governing the relationship of landlord and tenant,
has no relevance for determining the question of what should be
the measure of damages which a successful landlord should get
from the tenant for being kept out of the possession and
enjoyment of the property. After determination of the tenancy,
the position of the tenant is akin to that of a trespasser and he
cannot claim that the measure of damages awardable to the
landlord should be kept tagged to the rate of rent payable under
the provisions of the rent control order. If the real value of the
property is higher than the rent earned then the amount of
compensation for continued use and occupation of the property
by the tenant can be assessed at the higher value. We find
ourselves in agreement with the view taken by the Nagpur High
Court.
Placing reliance on the decision of this Court in
Kunhayammed & Ors Vs. State of Kerala & Anr., (2000) 6
SCC 359, Shri Ranjit Kumar, the learned senior counsel
submitted that the decree of trial Court merges in the decree of
the appellate Court and, therefore, the tenant shall continue to
remain a tenant (and shall not become an unlawful occupant),
until the passing of decree by the highest Court because the
decree would achieve a finality only when the proceedings have
finally terminated and then the decree of trial Court shall stand
merged in the decree of the appellate Court, the date whereof
only would be relevant for determining the nature of occupation
of the tenant. We are not impressed.
In Kunhayammed & Ors. (supra), this Court, on an
elaborate discussion of the available authorities, held that once
the superior Court has disposed of the lis before it either way,
i.e. whether the decree or order under appeal is set aside or
modified or simply confirmed, it is the decree or order of the
superior Court, Tribunal or authority which is the final, binding
and operative decree or order wherein merges the decree or
order passed by the court, tribunal or the authority below.
However, this Court has also observed that the doctrine of
merger is not of universal or unlimited application. In spite of
merger the actual fact would remain that it was the decree or
order appealed against which had directed the termination of
tenancy with effect from which date the tenant had ceased to be
the tenant, and the obligation of the tenant to deliver possession
over the tenancy premises came into operation though the same
remained suspended because of the order of stay.
We are, therefore, of the opinion that the tenant having
suffered a decree or order for eviction may continue his fight
before the superior forum but, on the termination of the
proceedings and the decree or order of eviction first passed
having been maintained, the tenancy would stand terminated
with effect from the date of the decree passed by the lower
forum. In the case of premises governed by rent control
legislation, the decree of eviction on being affirmed, would be
determinative of the date of termination of tenancy and the
decree of affirmation passed by the superior forum at any
subsequent stage or date, would not, by reference to the
doctrine of merger have the effect of postponing the date of
termination of tenancy.
In the Delhi Rent Control Act 1958, the definition of ‘a
tenant’ is contained in clause (l) of Section 2. Tenant includes
‘any person continuing in possession after the termination of his
tenancy’ and does not include ‘any person against whom an
order or decree for eviction has been made’. This definition is
identical with the definition of tenant dealt with by this Court in
Chander Kali Bai & Ors. case (supra). The tenant-respondent
herein having suffered an order for eviction on 19.3.2001, his
tenancy would be deemed to have come to an end with effect
from that date and he shall become an unauthorized occupant.
It would not make any difference if the order of eviction has
been put in issue in appeal or revision and is confirmed by the
superior forum at a latter date. The date of termination of
tenancy would not be postponed by reference to the doctrine of
merger.
That apart, it is to be noted that the appellate Court while
exercising jurisdiction under Order 41 Rule 5 of the Code did
have power to put the tenant-appellant on terms. The tenant
having suffered an order for eviction must comply and vacate
the premises. His right of appeal is statutory but his prayer for
grant of stay is dealt with in exercise of equitable discretionary
jurisdiction of the appellate Court. While ordering stay the
appellate Court has to be alive to the fact that it is depriving the
successful landlord of the fruits of the decree and is postponing
the execution of the order for eviction. There is every
justification for the appellate Court to put the tenant-appellant
on terms and direct the appellant to compensate the landlord by
payment of a reasonable amount which is not necessarily the
same as the contractual rate of rent. In Marshall Sons & Co.
(I) Ltd. Vs. Sahi Oretrans (P) Ltd. & Anr., (1999) 2 SCC
325, this Court has held that once a decree for possession has
been passed and execution is delayed depriving the judgment-
creditor of the fruits of decree, it is necessary for the Court to
pass appropriate orders so that reasonable mesne profits which
may be equivalent to the market rent is paid by a person who is
holding over the property.
To sum up, our conclusions are:-
(1) while passing an order of stay under Rule 5 of Order 41 of
the Code of Civil Procedure, 1908, the appellate Court does
have jurisdiction to put the applicant on such reasonable
terms as would in its opinion reasonably compensate the
decree-holder for loss occasioned by delay in execution of
decree by the grant of stay order, in the event of the
appeal being dismissed and in so far as those proceedings
are concerned. Such terms, needless to say, shall be
reasonable;
(2) in case of premises governed by the provisions of the Delhi
Rent Control Act, 1958, in view of the definition of tenant
contained in clause (l) of Section 2 of the Act, the tenancy
does not stand terminated merely by its termination under
the general law; it terminates with the passing of the
decree for eviction. With effect from that date, 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;
(3) the doctrine of merger does not have the effect of
postponing the date of termination of tenancy merely
because the decree of eviction stands merged in the
decree passed by the superior forum at a latter date.
In the case at hand, it has to be borne in mind that the
tenant has been paying Rs.371.90p. rent of the premises since
1944. The value of real estate and rent rates have skyrocketed
since that day. The premises are situated in the prime
commercial locality in the heart of Delhi, the capital city. It was
pointed out to the High Court that adjoining premises belonging
to the same landlord admeasuring 2000 sq. ft. have been
recently let out on rent at the rate of Rs.3,50,000/- per month.
The Rent Control Tribunal was right in putting the tenant on
term of payment of Rs.15,000/- per month as charges for use
and occupation during the pendency of appeal. The Tribunal
took extra care to see that the amount was retained in deposit
with it until the appeal was decided so that the amount in
deposit could be disbursed by the appellate Court consistently
with the opinion formed by it at the end of the appeal. No fault
can be found with the approach adopted by the Tribunal. The
High Court has interfered with the impugned order of the
Tribunal on an erroneous assumption that any direction for
payment by the tenant to the landlord of any amount at any rate
above the contractual rate of rent could not have been made.
We cannot countenance the view taken by the High Court. We
may place on record that it has not been the case of the tenant-
respondent before us, nor was it in the High Court, that the
amount of Rs.15,000/- assessed by the Rent Control Tribunal
was unreasonable or grossly on the higher side.
For the foregoing reasons, the appeal is allowed. The
order of the High Court is set aside and that of the Tribunal
restored with costs incurred in the High Court and in this Court.
However, the tenant-respondent is allowed six weeks’ time,
calculated from today, for making deposits and clearing the
arrears upto the date consistent with the order of the Rent
Control Tribunal.