ORDER
Vikramajit Sen, J.
1. The present suit was filed in May, 1996 for Ejectment and for Recovery of Rs. 13,37,928/- (Rs. Thirteen Lakhs Thirty Seven thousand Nine hundred Twenty Eight only) towards mesneprofits and for determination and grant of future mesne-profits. During the pendency of the suit, possession of the demised property was handed back to the Plaintiff on 7.1.1999. While resuming possession the Plaintiff had issued a written receipt mentioning inter alia, that the Security Deposit of Rs. 14,40,000/- (Rs. Fourteen Lakhs Forty Thousand only) would be returned, if still found due after adjudication of mesne profit, together with interest thereon at the rate of 15% per annum with half-yearly rests. The Plaintiff had agreed that the interest would be calculable from 7.1.1999.
2. Both the parties have led evidence through affidavits. The Plaintiff has filed an affidavit of Shri Hakumat Rai Malik, Director-in-Charge and Manager Shareholders of the Plaintiff dated 22.1.1999 and another affidavit of the same person dated 10.8.1999. The Defendant has filed an affidavit dated 16.7.1998 of Shri Vikram S. Ahuja, Joint Managing Director of the Defendant as also an affidavit dated September 1999 of Ms. Sonia Beri, Manager of the Delhi branch of the Defendant Company. Both parties have filed numerous annexures thereto, being copies of Lease Deeds of other properties. The Plaintiff has however also filed a Lease Deed dated 28.5.1999 between the plaintif and Sem Tian Exports and Hotels (Pvt.) Ltd. In respect of the suit property for the period of three years commencing from 1.6.1999.
3. The suit, on the only remaining issue of determination and grant of mesne profits, has to be decided and disposed of on the basis of evidence led by both parties by means of their affidavits.
4. In support of his contention that mesne profits have to be granted at the prevailing market rent, Shri Arun Mohan, learned Senior counsel for the Plaintiff has relied on the following judgments:
1. P.S. Bedi Vs. Project & Equipment Corporation, .
2. Joginder Lal Kuthiala Vs. Bank of India .
3. Theeta Industrial Vs. Harinder Singh 1997 RLR 31 (DB) para 18 on page 38.
4. Roger Enterprises Vs. Renu Vaish 1998 (444) DRJ 322, 325=1998 (1) A.D. (Delhi) 976.
5. S. Kumar Vs. G.R. Kathpalia 1999 (1) AD (Delhi) 744 (DB) para 4 on page 747 (Para 5 for interest on mesne-profits)
S. Kumar’s case (supra) was additionally relied on by the Plaintiff in support of its claim for interest on the amount of mesne profits/damages determined by the Court. Since these very views have been voiced by the Supreme Court in Fateh Chand Vs. Balkishan Dass, , the proposition must be taken as firmly established.
5. The Defendant has been in possession of the suit property since 15.5.1985 pursuant to the creation of a lease between the parties, evidenced by a Lease Deed of that date. This Lease Deed contained a clause permitting its renewal/extension. Mr. R. Venkataramani, learned Senior counsel for the Defendant, placed great emphasis on the ground that what was contracted between the prties was an extension of the original period of lease and not a renewal. Predicating his arguments on the decision delivered in Provosh Chandra Dalui Vs. Bishava Nath Banerji 1989 (Supp. 1) SCC 487, it was contended that since only an extension was carried out, the original Lease continued for the additional period also. This argument assumes some significance for the reason that if the Defendant continued in lawful possession of the suit property the tenancy could not have been terminated by the issuance of a notice under Section 106 of the ‘Transfer of Property Act, there being no default in payment of rent and no transgressions or violation of the terms of the lease. This is undoubtedly the correct exposition of the law. The relevant clause of the Lease Deed in this context has been reproduced in the plaint itself. It reads as follws:-
That the initial period of this Lease shall expire on 14th May, 1988 subject to option of the Lessee for extension of the Lease for another period of three years and such requests of the lessee shall not be refused provided the lessee agrees to pay for the extended period of rent with twenty per cent increase in the last paid rate of rent and in the event a fresh lease deed on the similar terms and conditions as contained herein shall be executed between the parties. Every increase, in the period of the lease would be for only three years duration subject to increase of rental by twenty per cent on the then agreed rate of rent at the time of each renewal.
6. However, since the Lease Deed itself specifies and envisages that a fresh Lease Deed shall be executed between the parties, the fine but sound distinction between an extension and renewal of the Lease does not fall to be determined in the facts of the present case. What was clearly understood between the parties was that a fresh Lease Deed would be executed. The ratio in Provosh Chandra Dalui’s (supra) case has therefore no applicability. The Defendant should have approached the Court for the specific performance of the renewal clause, if it was its case that the Plaintiff was bound to but was illegally refuting to execute a fresh lease. This has not been done. For these reasons, irrespective of the fact that the rent being tendered was in terms of the expired Lease Deed, i.e. at an increase of 20%, the tenancy could only have continued from month to month. The tenancy would be merely one of “sufferance”. The following observations from Burmah Shell Oil Distributing Vs. Khaja Midha Noor and Others, ,
“4. Indubitably, the lessee came in possession of the property in question on 16th Jan. 1958. The lease was for a period of ten years with a right of renewal for a further period of five years. After the expiry of ten years, no instrument was executed by the parties and the lessee continued to remain in possession of the suit property. The lessor accepted the rent and allowed the lessee to continue. It is relevant in this connection to refer to the provisions of the Transfer of Property Act, 1882 (hereinafter called `the Act’). Section 106 of the Act deals with the duration of certain leases in absence of written contract or local usage and S. 107 deals how leases are to be made. These sections read as follows:
106. In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee by six months’ notice expiring with the end of a year of the tenancy; and a lease of imovable property for any other purpose shall be deemed to be a lease from month to month terminable, on the part of either lessor or lessee, by fifteen days notice expiring with the end of a month of the tenancy.
Every notice under this section must be in writing, signed by or on behalf of the person giving it, and either be sent by post to be party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants, at his residence, or if such tender or delivery is not practicable affixed to a conspicuous part of the property.
107. A lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument.
All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.
Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one each such instrument shall be executed by both the lessor and the lessee:
Provided that the State Government may, from time to time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession”.
“5. In view of the paragraph 1 of S. 107 of the Act, since the lease was for a period exceeding one year, it could only have been extended by a registered instrument executed by both the lessor and the lessee. In the absence of registered instrument, the lease shall be deemed to be “lease from month to month”. It is clear from the very language of S. 107 of the Act which postulates that a lease of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument. In the absence of registered instrument, it must be a monthly lease. The lessee and the sub-lessee in the facts of the case continued to remain in possession of the property on payment of rent as a tenant from month to month. The High Court so found. We are of the opinion that the High Court was right”.
7. The acceptance of rent at the escalated rate would also not amount to an estoppel. Whether a waiver has taken place is an altogether different consideration. A notice was issued in conformity with Section 106 in the contingency envisaged in Section 111(h) of the Transfer of Property Act. The latter provision states that a lease determines on the expiration of a notice to determine the Lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other. I cannot find any act of the Plaintiff which would manifest its intention to treat the Lease as subsisting either with or without the express or implied consent of the Defendant. Prior to 1.3.1996, each time the Plaintiff accepted rent a tenancy for that month would be deemed to have been created. However, there can be no controversy that commencing from 1.3.1996 the Plaintiff encashed the cheques sent by the Defendant pursuant to a preservation of its rights in terms of the orders of this Court dated 17.5.1996. The Plaintiff would, therefore, be entitled to mesne profits from this period forwards. But for the prior period, I am equally certain that estoppel against the claim of mesne profits would operate and would negate it.
8. It is contended by the Plaintiff that the market rent would be Rs. 150/- per sq. ft. per month, and that the Plaintiff had confined its claim of Rs.125/- per sq. ft. per month. To buttress this claim the Plaintiff has filed four Lease Deeds along with its affidavit by way of evidence dated 22.1.1999. The rentals in these Lease Deeds ranges from approximately Rs. 95/- to Rs. 150/- per sq. ft. Keeping the suroundings, location and environs in mind (the other occupants in the area where the demised premises are located being highly reputed concerns) I am of the view that the area is comparable to any other part of Delhi. In the legal regime presently prevailing holding over by tenants, by exploiting the endemic delays of litigation, needs to be discouraged and deprecated. Despite being put to notice that the Plaintiff would be claming damages/mesne profits at the rate of Rs. 125/- per sq. ft., the Defendant chose not to vacate the premises but to fight the present litigatin. On the strength of the decision cited by the Plaintiff, if the Court comes to the conclusion that this rate of Rs. 125/- per sq. ft. per month is not unreasonable and approximately corresponds to the prevailing rentals, it would be just and proper to grant mesne profits at this very rate. In its affidavit dated 16.7.1998 the Defendant had produced Lease Deeds of premises located in Greater Kailash-I Market and in Greater Kailash-II. If there was such an appreciable difference between the rent claimed by the Plaintiff in respect of the suit premises and rentals of available space in comparable areas, the Defendant would have shifted out of the suit property. Having failed to do so, the Defendant cannot be heard to complain on this score today and must be deemed to have profited by this very measure.. The Defendant has further controverted the applicability of the Lease Deed relied upon by the Plaintiff on various grounds. As regards location. I have already held that the suit property was comparable to the best. They certainly can be favourably compared to those in Greater Kailash, Green Park, Masjid Moth and Bhikaji Cama Place.
9. The next ground, of the large amount of Security Deposit lying in the hands of the Plaintiff/landlord, is valid since the interest that would accrue on a large deposit would offset a lower rental. The Security Deposit in the Lease Deed relied upon by the Plaintiff was generally of six months. The Defendant has given a Security Deposit equivalent to 35 months. The differential in the Security Deposits can equitable be accounted for by not granting any interest on the mesne profit that have accrued, month to month, since 1.3.1996.
10. The Defendant has also assailed the Plaintiff’s comparison on the basis of the four Lease Deeds filed by it, on the grounds that a part of the demised premises constitutes the Basement. This contention is not of great significance since the location of the premises, in question are such that the Basement has considerable utility. It is easily accessible, being at the corner of the building and is immediately below the other portion of the demised premises. Even if the rental of the premises in Bhikaji Cama Place is not taken into consideration the average or mesne of rentals is approximately Rs. 125/- per sq. ft.
11. The most significant and irrefutable evidence produced by the Plaintiff, which in my view clinches the issue and annihilates the stand of the Defendant, is the leasing of the suit premises to M/s Sam Exports (Pvt.) Ltd. at a rental of Rs. 5,00,000/- per month for a period of three years with six months’ rent as security deposit. The area let out is 2,216 sq. ft. on the ground floor, 2,216 sq. ft. basement and 750 sq. ft. mezzanine. This computes to an average of Rs. 96.5 per sq. ft. per month. It must be borne in mind tht the rentals in Delhi have been falling drastically in teh last two years. A rental of Rs. 96.5 per sq. ft. in 1999 is therefore certainly equitable to Rs. 125/- per sq. ft. in 1996.
12. Learned counsel for the Defendant has drawn attention to the fact that the Defendant has taken premises on rent at the rate of Rs. 50/- per sq. ft. per mensem. This is wholly irrelevant. What is required to be kept in perspective are the rentals available in the area where the suit premises are located. Learned Counsel had relied on the decision in Fateh Chand’s case (supra) and Smt. Purificacao Fernandes and Another Vs. Dr. Hugo Vi- cente De Perpetuo Socorro Andrade Menezes and Others, AIR 1985 Bombay 202, in support of his contention that the definition of mesne profits does not admit the grant of market rent. The definition contained in Section 2(12) of the Code of Civil Procedure reads as follows:
“”mesne profits” of property means those profits which the person in wrongful possession of such property actually received or might with ordinary 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”.
13. It was strongly contended by learned Counsel for the Defendant that the definition has been cast in the mould not of the owner but of the person in wrongful possession. Therefore, it was argued, that in quantifying mesne profits it is wholly irrelevant what are the profits likely to be earned by the Plaintiff. It was, in fact, in this context that he had drawn reference to the Defendant having taken premises on rent in the Santushti Complex, Delhi at a rental of Rs.50/- per square foot per month. In Fateh Chand’s case (supra) the Apex Court had held that “the normal measure of Mesne Profits is the value of the user of land to the person in wrongful possession. The assessment of compensation based, not on the value of the user but on an estimated return on the value of the property, cannot be sustained”. These observations were made in circumstances where rents and ejectment of tenants was regulated by Rent Control Statutes. The existing tenant could not be asked to pay escalation. Even if premises were freshly relet, the new tenant was statutorily liable to pay only the standard rent. With the withdrawal of the protection to tenants in Delhi paying rentals in excess of Rs. 3500/- per month, the `profits’ earned by the tenant would be the payment of the market rent saved by the tenant by holding over. Where a claim for a specific amount as mesne profits has ben raised by the landlord, which claim is realistic in comparision to the prevailing market rents, it would be just and equitable that the profits received by the tenant be considered at this rate. Otherewise, surely, the tenant would have vacated the premises on receipt of the notice to quit. Since the judgment in Smt. Purificacao’s case (supra) has been delivered with the Rent Control Statutes in mind, it would also not apply. The following passage from Fateh Chand’s case (supra) calls for reproduction, to clear the controversy:
“The normal measure of mesne profits is therefore the value of the user of land to the person in wrongful possession. The assessment made by the High Court of compensation at the rate of five per cent of what they regarded as the fair value of the property is based not on the value of the user, but on an estimated return on the value of the property, cannot be sustained. The Attorney General contended that he premises were governed by the Delhi and Ajmer-Merwara Rent Control Act XIX of 1947 and nothing more than the standard rent of the property assessed under that Act could be awarded to the Plaintiff as damages. Normally a person in wrongful possession of immovable property has to pay compensation computed on the basis of profits he actually received or with ordinary diligence might have received. It is not necessary to consider in the present case whether mesne profits at a rate exceeding the rate of standard rent of the house may be awrded, for there is no evidence as to what the `standard rent’ of the house was. From the evidence on the record it appears that a tenant was in occupation for a long time before 1947 of the house in dispute in this appeal and another house for aggregate rent of Rs.180/- per mensem, and that after the house in dispute was sold, the Plaintiff received rent from that tenant at the rate of Rs.80/- per mensem, and the vendor of the Plaintiff at the rate of Rs. 106/- per mensem. But this is not evidence of standard rent within the meaning of Delhi and Ajmer Merwara Rent Control Act, XIX of 1947”.
14. I have already held that the decision relied upon by the Plaintiff mentioned in the beginning of this judgment, supports the contention of the learned Counsel for the Plaintiff that it is the market rent which has to be kept in view and that if a demand is made for damages at a rate which is realistic, keeping the market rents in view, it is these rates that should be granted.
15. Keeping all these factors in mind, I am of the considered opinion that the Plaintiff is entitled to claim mesne profits in respect of the suit property at the rate of Rs. 125/- epr sq. ft. The Defendant has failed to persuade me that the claim of Rs. 125/- per sq. ft. contained in the legal notice was contrary to the rentals then prevailing in the market. Differently stated, the Defendant has failed to establish that the profit that it had gained from the use of these premises were not at this rate.
16. Accordingly, the suit is decreed for mesne profits at the rate of Rs. 125/- epr sq. ft. for the period of 34 months indicated above. The ‘rentals’ paid upto 31.5.1998 would be subtracted from the amount. Further the Security Deposit together with interest thereon at the rate of 18 per cent annum, with effect from 7.1.1999, on which date possession was returned to the landlord, would also be deducted. The following amount would fall due:
4432 sq. ft. x Rs. 125 =
Rs.5,54,000/- for one
month. For 34 Months
(Rs.5,54,000 x 34) Rs. 1,88,36,000/-
Less Security Deposit Rs.14,40,000.00
Less damages/rent
received for the
period from
1.3.96 to 14.5.97
Rs. 71,223.60
per month Rs. 10,29,295.89
Less damages/rent
received for the
period from
15.5.97 to 31.12.98
Rs.85,460.40
per month Rs.16,70,612.90
Less interest
18 per cent
per annum from
7.1.99 to 28.3.2000
on Security Deposit
of Rs.14,40,000. Rs.3,17,431.32
Rs.44,57,340.11
Rs.1,43,78,659.89
17. The Plaintiff would also be entitled to costs as well as interest at the rate of 18 per cent per annum on the decretal amount from the date of the decree till its realisation.
18. Subject to the Plaintiff depositing the requisite Court Fee, now additionally payable, within thirty days, the decree be drawn up.