INDIAN OIL CORPORATION LTD VERSUS SUDERA REALTY PRIVATE LIMITED

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.6199 OF 2022

(Arising out of SLP(C)No.15587 of 2022)

(Diary NO.16519/2019)

INDIAN OIL CORPORATION LTD. … APPELLANT(S)

VERSUS

SUDERA REALTY PRIVATE LIMITED … RESPONDENT(S)

WITH

CIVIL APPEAL NO.6200 OF 2022

(Arising out of SLP(C)No.15588 of 2022)

(Diary NO.16517/2019)

INDIAN OIL CORPORATION LTD. … APPELLANT(S)

VERSUS

SUDERA REALTY PRIVATE LIMITED … RESPONDENT(S)

J U D G M E N T

K.M. JOSEPH, J.

Delay condoned. Leave granted.

1. The appellant is the defendant in the suit. By

the impugned judgment, the division bench of the High

Court has partly allowed the appeal filed by the

appellant and modified the decree granted by the

learned Single Judge in a suit filed by the

respondent seeking mesne profits.

2. The respondent-plaintiff instituted the suit on

the following basis. The respondent demised the

centrally air-conditioned 2

nd, 3

rd and 4th floors of

premise no. 1, Shakespeare Sarani, Kolkata and a nonair-conditioned guest house on the 9th floor. The

lease was to subsist for a term of 21 years

commencing from the date when the said floors were

handed over to the appellant lessee. The respondent

further claimed that there is a supplementary

agreement which is also duly registered on

12.09.1969, which had brought about certain

modifications in the original lease dated 21.11.1968.

It was further the case set up by the respondent that

the 2

nd and 3

rd floors came to handed over on

12.09.1969 and the possession of the 4th floor was

made over to the appellant on 18.12.1969. It was

alleged that there was failure on the part of the

appellant to join and cooperate with the respondent

in the matter of finalisation, execution, and

registration of an appropriate document of lease in

regard to the 2

nd, 3rd and 4

th floors. There is

reference to an earlier suit which was filed in the

year 1978, and which was not followed to its logical

culmination but ended in a compromise. More of it

later. Suffice it to notice at this stage that the

proximate cause for the litigation was the failure of

the appellant to hand over vacant possession of the

nd, 3rd and 4

th floors, upon the expiry of the lease.

Possession was handed over to the respondent only on

31.05.1994. Resultantly, the respondent alleged that

the appellant was in wrongful possession of the 2

nd,

rd and 4

th floors after the expiry of the lease on

11.09.1990 i.e., for the 2

nd and 3

rd floors and for the

th floor on 17th December, 1990 or alternatively on

the expiry of the 3

rd or 4th of November, 1991 till

31.05.1994. Even in terms of the computation of the

period of 21 years by the appellant, this illegal

possession continued till 31.05.1994. The respondent

claimed mesne profits in respect of 57105 sq. feet at

the rate of Rs.31 per sq. feet per month.

3. In the written statement filed by the appellant

the case inter alia set up was that the period of

lease was to be computed from the date of delivery of

possession. The document dated 21st November, 1968

constituted the actual demise of the property. By

notice dated 7th December, 1977, the respondent had

determined the lease and there was a suit filed by

the respondent which was dismissed as not pressed and

appellant had constructed a new office building. It

took some time to vacate. There was a clause for

premature termination of the lease at the option of

the appellant. Appellant was entitled to the

protection of the West Bengal Tenancy Act, 1956

(hereinafter referred to as the ‘Tenancy Act’). The

case of wrongful possession was denied. In the

alternative, it was contended that respondent

accepted monthly rent after the determination of the

tenancy by notice dated 7th December, 1977. The

tenancy is also protected therefore under the Tenancy

Act.

4. The learned Single Judge found the plaintiff

entitled to mesne profits. A referee was appointed to

quantify the mesne profits. Both the appellant and

the respondent filed appeals.

THE FINDINGS IN THE IMPUGNED JUDGMENT

5. The impugned judgment would show that the

appellant addressed the following contentions.

Mere reference to a document as a lease could not be

a ground to find that the document dated 21.11.1968

was a lease deed. The nature of the document required

examination. The effect of the withdrawal of the suit

filed by the respondent in the year 1986 and the

impact of the Tenancy Act was not properly assessed.

There was holding over. Therefore, a decree of mesne

profits was without warrant. The Court found that the

appellant had not pleaded the case that a fresh

tenancy was created after the expiry of the lease by

efflux of time, and found itself unable to accept the

said contention. The receipt of occupation charges by

the respondent as evident from the letter of the

respondent dated 02.01.1991 was without prejudice. It

did not create a fresh tenancy. Mere continuation in

occupation of the demised premises after the expiry

of the lease, notwithstanding the receipt of an

amount by the landlord, would not create a tenancy.

The appellant was to be treated as a tenant at

sufferance and akin to a trespasser. The lease did

not contain any renewal clause and it was determined

upon the expiry of the fixed period. However, the

division bench took the view that in the absence of

any other evidence, as to the exact date when the

appellant took possession of the 2

nd and 3

rd floors, it

was safe to accept 16th September, 1969 as the

starting point of the lease in regard to the 2

nd and

rd floors. Accordingly, the division bench modified

the judgment in regard to the starting point, by

finding that the starting point of the lease for the

nd and 3

rd floors would be 17.09.1969. Whereas, in

regard to the 4th floor, the finding of the learned

Single Judge that the lease commenced on 04.11.1970

was affirmed. Accordingly, it was that appeal (APD

no. 494 of 2014) was allowed in the aforesaid manner.

This is after dismissing the appeal (APO no. 207 of

2015). It is against the said judgment, namely, the

judgment in APO No.207/2015 and APD No.494/2014, that

the appeals have been carried by the appellant.

6. We heard the Ms. Madhavi Diwan, learned ASG on

behalf of the appellant and Dr. A.M. Singhvi, learned

Senior Counsel on behalf of the respondent.

7. Ms. Madhavi Divan, Additional Solicitor General

raised the following contentions. The agreement of

lease dated 21.11.1968 contemplated that the term of

21 years would commence from the date when the

premise was handed over. The lease was terminable at

any time after the expiry of 8 years of the term of

21 years. The construction of the premises was

ongoing. On 21.11.1968, none of the floors to be

leased to the defendant had been completed. Even on

12.09.1969, when the supplementary agreement as also

the deed of mortgage was executed, the possession did

not change hands. The mortgage deed, it is pointed

out, records that the 2

nd and 3

rd floors were in the

course of construction. Advances were given under the

mortgage to the respondent as it was in need of money

to complete construction of the building, in

particular, the 2

nd, 3rd and 4th floors. The parties

contemplated a formal lease deed being executed at a

later date. The premises were admittedly not ready

for effective occupation till 04.11.1970. Reliance is

placed on the letter dated 12.09.1969, the deed of

mortgage and the minutes, dated 05.06.1980, by which

the suit, and the cross-suits came to be withdrawn

and the respondent agreed to forego the rent prior to

1970, on account of late possession. The appellant

continued to occupy the premises after the issuance

of the notice to quit and the filing in the year 1977

of the cross-suits. Payment of monthly rent and

acceptance without demur is pointed out. The letter

dated 19.10.1990, required the tenant to vacate the

premises by 11.09.1990, as far as the 2

nd, 3rd floors

are concerned and the 4

th floor was to be vacated by

17.12.1990. This was short of 21 years from the date

of effective possession. It is pointed out that the

claim for mesne profits commenced from these very

dates, namely, 12.09.1990 and 18.12.1990. The

appellant has paid rent for the entire period. The

claim for mesne profits is in excess of 45 crores. It

is pointed out that the respondent entered into the

lease agreement with another company where the rate

was Rs.15 per sq. feet about 13 years thereafter

namely in 2008 whereas Rs.31 per sq. feet is said to

be the rate at which mesne profits is calculated qua

the appellant.

8. The appellant contends that having regard to the

definition of the mesne profits in Section 2(12) of

the CPC, it is indispensable for the respondent to

establish wrongful possession. The respondent has

agreed that effective possession could not be

reckoned even from 15.09.1969 and, therefore, the

question of the term of 21 years expiring based on

11.09.1969 could never have arisen. The impugned

judgment, having been accepted by the respondent, the

21 years lease could not have come to an end as early

as on 11.09.1990 as the division bench has found that

in regard to the 2

nd and 3

rd floors, 17.09.1969 as the

date of the appellant being put in possession. It is

contended that the period of 21 years had not expired

when notice dated 19.10.1990 had been issued. It was

the respondent which curtailed the expiry period of

21 years by issuance of notice dated 19.10.1990. The

notice dated 19.10.1990 met the requirement of

Section 106 of the Transfer of Property Act. On

account of the determination prior to the expiry of

the lease, the appellant became entitled to the

protection under the Tenancy Act. Section 13 of the

said act proscribed any order or decree for recovery

of possession of any premise against a landlord

except on a ground set out in the said enactment. The

provisions of the said act were not complied with.

The court should reject the contention of the

respondent that the notice dated 19.10.1990 was not a

notice to quit.

9. It is further contended that having regard to the

notice issued by the respondent, dated 12.12.1977,

the appellant became entitled to the protection of

the Tenancy Act. Reliance is placed on the judgment

reported in Calcutta Credit Corporation Ltd., &

Another v. Happy Homes (P) Ltd.1. Reliance is also

1 1968 2 SCR 20

placed on the decision in Tayleur v. Wildin2 to

contend that the withdrawing of the notice and the

contention of the parties would not avail the

landlord. Section 113 of the Transfer of Property Act

is invoked to contend that there is no waiver. A new

tenancy has come into existence thereupon in view of

the quit notice, and what is more, of the suit,

despite the arrangement arrived between the parties.

The decision reported in Ranjit Chandra Chowdhury v.

Mohitosh Mukherjee3 relied upon by the respondent is

sought to be distinguished both on the basis that the

earlier judgment in Calcutta Credit Corporation Ltd.

(supra) was rendered by a bench of three learned

judges and the later judgment was pronounced by a

bench of a lesser strength, and furthermore, on the

basis that the earlier judgment had not been analysed

by the later bench. It is further contended that the

respondents are equally misplaced in relying on

Tayabali Jaffarbhai Tankiwala v. Messrs. Asha and Co.

and another4. It is described as a judgment rendered

2 (1867- 68) LR 3 Ex Cases 303

3 (1969) 1 SCC 699

4 (1970) 1 SCC 46

per incuriam. It is also contended that it is

otherwise distinguishable. The petitioner, it is

pointed out was a monthly tenant from November, 1968.

In an argument raised in the alternative and without

prejudice to the earlier argument, it is further

contended that a large portion of the claim for mesne

profits was barred by limitation. Article 51 of the

Limitation Act applies. The claim for the entire

period prior to three years before the filing of the

suit, i.e., for the period prior to 10.04.1992, would

be barred.

THE SUBMISSIONS OF THE PLAINTIFF

10. The dispute spread over 30 years is on account of

conduct of the appellant. The respondent has been

unable to recover any mesne profits due to it. As on

the date of the registered agreement for lease

21.11.1968, the construction of the 2nd, 3rd and 4th

floors were ongoing. It is submitted that there was

indeed a valid lease deed between the parties. It was

the admitted case and the appellant cannot be

permitted to resile from the said position. It is

next contended that the case that the lease deed was

determined in 1977 is untenable. The alleged

termination notice is dated 07.12.1977. The lease ran

uninterrupted for 21 years and expired by the efflux

of time. The decision on Pabitra Kumar Roy and

Another v. Alita D’Souza5 is relied upon. It is

pointed out that the termination notice dated

07.12.1977 did not result in the actual determination

of lease prior to expiry and the appellant continued

to occupy the premise “as before”. Notice was not

even tendered in evidence by the appellant in these

proceedings. The parties never acted upon the

termination notice. The respondent did not go so far

as to seek the appellant’s eviction. The respondent

brought a suit seeking rent for the period 15.09.1969

to 04.11.1970. In the meeting held on 05.06.1980, the

litigation ended in view of the binding settlement.

It was understood that the parties have no further

5 (2006) 8 SCC 344

claim. It is contended that neither party admitted to

the other’s entitlement for the claims raised.

11. As regards the termination prior to the expiry is

alleged to have taken place consequent upon the

communication dated 19.10.1990, it is described as a

letter of inquiry and not a notice of termination as

contended by the appellant. It is contended that as

far as the attempt by the appellant to evolve a new

case before this Court that there was a fresh tenancy

created as a result of the waiver, it is countered

contending that the argument of the appellant is de

hors the facts in the present case. The decision of

this Court in Calcutta Credit Corporation Ltd. &

Another v. Happy Homes (P) Ltd.6 was not dealing with

the question whether the waiver of the determination

notice results in a fresh tenancy. That is not the

ratio. The observations that consent to waive the

notice results in a new agreement are only obiter.

Reliance is placed on subsequent judgments to contend

that there would be revival of the old tenancy, when

there is waiver [(1969) 1 SCC 99, (1970) 1 SCC 446,

6 (1968) 2 SCR 20

AIR 1976 Cal 274, (2006) SCC Online Calcutta 248].

On facts, it is pointed out that appellant continued

to make rent payments. The statement in paragraph 14

filed by the appellant that it occupied premises and

paid monthly rent “as before” is emphasised. The

respondent lay store by contemporaneous communication

wherein appellant continues with the stand that lease

has not expired. Regarding the alleged termination by

letter dated 19.10.1999, it is complained that the

appellant never raised such a case in response to

communication or even in defence before the Court.

The letter of inquiry is not a determination. The

appellant itself understood that the respondent had

sought vacation of the premises on the basis of the

expiry of the lease period alone. The argument is a

mere afterthought. The acceptance of the occupation

charges by the respondent after the expiry of the

lease did not create monthly tenancy. The payments

were received on a “without prejudice basis” “as on

account payment”. The judgment of this Court in Nand

Ram (Dead) Through Legal Representatives and others

v. Jagdish Prasad (Dead) Through Legal

Representatives7 did not consider the consequence of

the payment being collected. The suit for mesne

profits is not barred by limitation. Mesne profits

accrues from day to day and the cause of action is a

continuing one. Being a continuing breach of contract

and a fresh cause of action arising on each day, the

appellant wrongfully occupied the property. Reliance

is placed on the judgment of this Court in Shakti

Bhog Food Industries Ltd. v. Central Bank of India

and Another8 to contend that limitation does not bar

the suit. The inconsistency in the stand of the

appellant at various stages is underlined.

ANALYSIS

The following points arise:

Point No.01: - Whether the documents styled as

agreement dated 21.11.1968 and the

supplementary agreement for lease dated 12th

September, 1969 constituted a lease?

Point No.02: - Whether the possession of 2nd and 3rd

floors were handed over on 17.09.1969 and 4th floor

stood handed over on 04.11.1970?

7 (2020) 9 SCC 93

8 (2020) SCC OnLine 482

12. An agreement for lease was executed between the

appellant and the respondent on 21.11.1968 in regard

to the 2

nd, 3rd and 4th floors of the premises. While

it is true that it contained a clause which did

contemplate that the respondent as the lessor put in

place a formal deed of lease in favour of lessee, if

the lessee would require the same, we are of the view

that the agreement of lease dated 21.11.1968 on its

own operated as a lease. It was a demise and operated

as such. Admittedly, it was a registered document.

Further, as correctly contended by the respondent,

the appellant in its pleadings proceeded to contend

that the agreement of lease dated 21.11.1968 operated

as a lease. In paragraph 4 of the written statement,

the appellant states as follows:

“4. With reference to paragraph 9 of the

plaint, it is denied that the defendant

failed and neglected to join or co-operate

with the Plaintiff in execution or

registration of the formal deed of lease. It

is denied that there was any question of any

finalization of the deed of lease. All the

terms and conditions of the lease were

finalized and set out in the document

described as agreement for lease dated 21st

November, 1969. The document envisaged that

the possession would be given to the

defendant upon completion of the building.

The period of lease was to be computed from

the date of delivery of possession. The said

document dated 21st November, 1968

constituted the actual demise of the property

and operated as deed of lease. Since the

Plaintiff and the defendant treated the said

document dated 21st November, 1968 as deed of

lease as modified by the Supplementary deed

dated 12th September, 1969, neither the

Plaintiff nor the defendant insisted upon

execution of a formal deed of lease as

requisite stamp duty as applicable to lease

had been paid and the said documents had been

registered.”

(Emphasis supplied)

Therefore, we cannot permit the appellant to draw

support from the aforesaid clause which gave the

appellant the right to require that a formal lease of

deed be executed.

13. A perusal of the agreement of lease dated

21.11.1968 would reveal the following:

The 2

nd, 3rd and 4th floors of the premises along

with the guest house which is collectively referred

to as ‘demised premises’ was the subject matter of

the lease of 21 years. The term of the lease has been

described as commencing from the date when the

demised premises would be handed over. It is true

that construction of the premises may not have been

over but at the same time, the term of the lease has

been specified as period of time (21 years) from the

date on which the demised property would be handed

over. We have no hesitation in repelling the argument

of the appellant that the fact that the construction

of the building was not over, would in the facts as

mentioned, detract from a transfer by lease coming

into being. As already noticed, the provision was for

a formal deed and that too, if the tenants so

requested. It will not stand in the way of the

transfer by way of a lease taking place. As already

noticed, there is a supplementary agreement of lease

on 12.9.1969. It would appear that there were certain

financial transactions, as amounts were advanced by

the appellant towards the construction of the

building. The interest of the appellant was sought to

be secured by a mortgage. The supplementary agreement

made certain modification to the original agreement.

Additional obligations were undertaken by the lessor

and certain rights were conferred on the lessee inter

alia. But what is relevant to notice is the term of

the original agreement dated 21.11.1968 that the

lease for a term of 21 years (Agreement to create the

lease for 21 years) would commence from the date of

handing over the premises.

14. Thus, we find that there was indeed a written

agreement of lease dated 21.11.1968. The term of the

lease was 21 years which was to begin from the date

on which demised premises was handed over to the

lessee. The rent for the demised premises was also

fixed.

15. The next question which would arise is, as to

when the possession was handed over? As we have

noticed, the dispute which is raised pertains to the

nd, 3rd and 4th floors of the building in question. As

already noticed by us, the Division Bench has found

in modification of the judgment of the learned Single

Judge that as there are no documents to show the

exact date, the appellant was put in possession of

the 2

nd and 3rd floors and fixed 17.09.1969 as the

starting point.

16. It is found that appellant was put in possession

of 4th floor on 04.11.1970. The case of the appellant

is that the possession of all the three floors in

question was handed over to it on 04.11.1970. The

respondent, on the other hand, would reiterate that

the 2nd and 3rd floors were handed on or before

September, 1969 and the security deposit for those

floors already handed over, was made by 27.09.1969.

17. According to the appellant, a perusal of the

mortgage deed, which is also executed on the same day

as the supplementary lease deed, would reveal that as

on the date of execution of documents, that is,

12.09.1969, the 2nd, 3rd and 4th floors were described

as “now in the course of construction on the said

leasehold land”. It is as the respondent was in need

of money to complete the construction of the building

that funds were given by the appellant. These facts

are borne out by the mortgage deed and the appellant

would contend that premise was handed over only on

04.11.1970. Now let us cull out the consequences of

accepting the different dates of handing over

possession. As far as the 4th floor is concerned, in

view of the findings by the High Court that the

possession of the 4th floor was handed over on

04.11.1970 and the same not being questioned before

us, we can safely proceed on the basis that the 4th

floor was handed over on 04.11.1970. In regard to the

nd and 3rd floors are concerned, the High Court has

laid store by Exhibit 2 to find that the possession

was handed over on 17.09.1969. Exhibit-2 is a letter

dated 16.09.1969 from the respondent to the

appellant. In the said letter it is stated as

follows:

“Dear Sir

It is to inform you that we have spent

Rs.8,54,265.60 being the payment in terms of

Indenture of Further Charge and Modification

dated 12.9.1969.

we are sorry to inform you that we have not

yet received payment as Security Deposit for

the floors already handed over to you. As

such, you are requested to kindly inform the

department concerned for the payment of

Security Deposit.”

18. In this regard, we may notice the relevant

clauses in the original agreement dated 21.11.1968.

There is reference to loans advanced or to be

advanced by the Lessee (appellant) to the respondent

remaining unpaid entitling the lessee to deduct 50%

of the monthly rent and appropriating the same to the

satisfaction of the loan with interest. In other

words, apparently the lessee (appellant) advanced

money. The building was to be constructed. The

appellant which advanced money to be inducted as

tenant, was liable to pay rent. The parties agreed

that 50% of the rent need not be paid to the landlord

(respondent) and it could be appropriated towards the

loan or loans with interest. Clause 8 of the

agreement contemplated that the appellant will

deposit to the account of the respondent a sum of

Rs.1,68,300/- which is equivalent of three months’

rent together with air conditioning and service

charges. The amount was to be held as security

deposit and to be refunded to the appellant without

interest on the termination of the period of the

lease or determination earlier. In regard to the 2

nd,

rd and 4

th floors, clauses 17, 18 and 19 may be

noticed.

“17. The Lessor shall complete

construction of the second floor in all

respects, make it fully equipped with all

electrical and sanitary fixtures and

installations and air-conditioned and hand

over the same to the Lessee immediately upon

expiration of six months from the date

hereof. With the making over possession of

the second floor to the Lessee the Lessor

shall also arrange for providing space of

accommodation to the Lessee sufficient for

parking 20 curs in a convenient place to be

selected mutually by the Lessor ·and the

Lessee.

18. The Lessor complete construction of the

third floor in all respects and make it fully

equipped with all electrical and sanitary

fixtures and installations and airconditioned and handover the same to the

Lessee immediately upon expiration of eight

and a half months from the date hereof and

with the making over possession of the third

floor to the Lessee the Lessor shall also

arrange for providing space or accommodation

to the Lessee sufficient for parking 10 more

cars in the convenient space to be selected

mutually by the Lessor and the Lessee.

19. The Lessor shall complete construction of

the Fourth floor in all respect and make it

fully equipped with all electrical and

sanitary fixtures and installations and airconditioned and hand over the same to the

Lessee immediately upon expiration of eleven

months from the date hereof and with the

making over possession of the fourth floor to

the Lessee the Lessor shall also arrange for

providing space or accommodation to the

Lessee sufficient for parking 10 more cars in

a convenient place to be selected by the

Lessor and the Lessee mutually...”

19. In other words, under the said agreement, in

regard to the 2nd floor, the respondent-Lessor

undertook to hand over possession to the Lessee upon

the passage of six months from the date of the

agreement. It was also obliged to make space for

parking. Likewise, in Clause 18, the possession was

to be handed over immediately upon the expiration of

eight and half months.

20. Clause 19 provided for making available the 4

floor immediately after expiration of eleven months

from the date of agreement dated 17.11.1968. Clause

21 provided for complying with the schedule for

handing over possession and resultantly, making the

respondent liable for penalty or damage settled at

10% of the monthly rent inter alia. Clause 22 makes

it clear that the respondent was to complete the

construction of the entire building (multi storey

building) within 3 years from 17.11.1968.

21. In the Supplemental Agreement, there were certain

changes by way of additional rights being created in

favour of the appellant. Clause 8 of the original

agreement stood modified, in that, in place of the

liability of the lessee for Rs.1,68,300/-, as already

noticed, it is provided that a sum of Rs.1,64,462.40

was to be paid in three equal instalments. The first

of such instalment was to be paid when the possession

of the 2nd floor was given. Second instalment was to

be paid when possession of the 3rd floor was given.

The third instalment was to be paid when possession

of the 4th floor was given. Rs.9900/- was payable in

connection with guest house. It is in light of this

clause that the Exhibit 2 letter dated 16.9.1969 must

be appreciated. In other words, the said letter would

indicate that in terms of the agreement, as 2

nd and 3rd

floors stood handed over, the respondent was

insisting for payment of the security deposit, the

appellant was obliged under the agreement (clause 8)

as modified in the supplementary agreement to pay to

the respondent. No doubt, the case of the appellant

would appear to be that the possession was not handed

over in total compliance of the agreement and the

attendant facilities were not still made available.

22. We would think that the findings rendered by the

High Court is a plausible view and we would,

therefore, take the view that possession of 2nd and 3rd

floors was handed over on 17.09.1969 and 4th floor

stood handed over on 04.11.1970.

Point No. 3: - Whether the appellant is a monthly

tenant from November, 1969?

23. The next question which would arise is whether

the appellant should be treated as a monthly tenant

for the reason that a formal registered deed was

contemplated. The agreement dated 17.11.1968 as also

the construction of the premises was not completed.

24. We are of the view that the contention that the

appellant should be treated as a monthly tenant even

from the very beginning is without any merit.

Accepting such a stand would in the first place run

counter to the written statement filed by the

appellant. In the written statement it is inter alia

stated as follows:

“..All the terms and conditions of the lease

were finalized and set out in the document

described as agreement for lease dated 21st

November, 1969. The document envisaged that

the possession· would be given to the

defendant upon completion of the building.

The period of lease was to be computed from

the date of delivery of possession. The said

document dated 21st November, 1968

constituted the actual demise of the property

and operated as deed of lease. Since the

Plaintiff and the defendant treated the said

document dated 21st November, 1968 as deed of

lease as modified by the Supplementary deed

dated 12th September, 1969, neither the

Plaintiff nor the defendant insisted upon

execution of a formal deed of lease as

requisite stamp duty as applicable to lease

had been paid and the said documents had been

registered…”

(Emphasis supplied)

25. The agreement dated 12.9.1969 is admittedly a

registered document. We do not find any force in law

or on facts to permit the appellant to contend that

the appellant be treated as a monthly tenant since

1968. We have noticed the stand taken by the

appellant that neither the appellant nor the

respondent insisted upon execution of a formal deed

of lease. The requisite stamp was paid. Thus, the

lease for 21 years came into being. The period of the

lease is to be calculated from the date when the

possession was handed over. We have although found

that possession, in fact, was handed over on the

dates when it is handed over as found in the impugned

judgment. The cases of the appellant is also in the

teeth of the correspondence dated 21.08.1990 and

03.11.1990, inter alia.

Point No. 04: - Whether there was a prior

determination of the lease of 21 years by the

respondent, if so, whether the appellant is entitled

to protection of the Tenancy Act?

26. The next contention raised by the appellant is

that in the development in the year 1977, the

respondent put an end to the lease dated 17.11.1968

and transformed the appellant into a monthly tenant

and what is more relevant, it entitled it to the

benefits under the West Bengal Tenancy Act. This

argument is based on the notice dated 12.12.1977

issued by the respondent by which according to the

appellant, the lease was terminated. According to the

appellant, the matter did not stop with the mere

issuance of the notice. Parties went to court. The

respondent filed O.S. No. 20/1978. The appellant also

filed a Suit.

27. A settlement took place between the parties on

05.06.1980. The minutes of the meeting dated

05.06.1980 read as follows:

“Minutes of the meeting held between Mis.

Indian Oil Corporation Ltd. (Tenants) And

M/s. Sudera Enterprises Pvt. Ltd. (Landlord)

In respect of the office premises at 1,

Shakespeare Sarani, Calcutta. - 71 under

occupation by Indian Oil Corporation Ltd.,

Eastern Region.

PRESENT

Shri R. M. Basrur: GM (P), IOC, HO

Shri G. S. Pandya: FC, IOC, HO

Shri S. C. Ghose : GM, Eastern Region

Shri M. B. Ramgadia: RPM, Eastern Region

Shri D.B. Puri : Secretary, IOC, HO

On behalf of the landlord, Shri S. Rampuria,

Shri M. Jha and Shri B.S. Agarwal were

present.

The meeting was hold in Bombay at 10:30 AM on

5th June, 1980 in Shri Basruria Cabin.

1. As per Shri Rampuria, the main irritant

between the parties for a very long time has

been the non-settlement of air-conditioning

charges consequent time notified by the

Calcutta Electricity Supply Corporation

(India) Ltd. It was stated that their company

have forwarded to IOC at various points of

time the rise as and when notified by the

C.E.S.C. Similarly, service charges which are

subject to osculation with increase in

electricity charges has not been settled for

a long time. As per the lease agreement, the

osculation is provided as under: -

"The charges for the electricity to be

consumed for working the air-conditioning

machines and the said lift to be used by

the Lease exclusively shall be borne and

paid by the Lessors. If at any time in

future the rate of charge per unit of

electricity consumed JS increased. the

lessee shall pay such increased charges or

differences, the disagreement between the

Lessee and the Lessor in fixing the

proportion the opinion or decision of the

Lessor will be final and the Lessor shall

accept the proportion to be fixed by or on

behalf of the Lessee".

2. The second, point was on account of

amount approximately to Rs.83,388.53

recovered as liquidated damages from them on

account of late possession of three floors.

This amount is subject to verification.

3. It was stated that the amount found due to

them should be paid with interest.

4. On behalf of IOC, the corporation out that

in the present conditions of load-shedding

consequent power shortage, particularly in

Calcutta, the corporation intends to put up a

Generator for which they nee the help of the

landlord by way permission to do so and also

providing space for putting up the same.

5. The matter was discussed at length in the

morning session and various points expressed

by both the parties were taken into account

and considered by both the parties. The

parties, thereafter adjourned to most again

in the afternoon with their considered

opinion n the matter.

6. In the second session in the afternoon,

the following formula was agreed subject to:

(i) The Board's approval of the Board of

Directors of IOC;

(ii) That all pending disputes will stand

settled and that the parties will have no

other claims against each other for the

past on any account whatsoever;

(iii) The cross suits pending from each

side will be withdraw immediately on

implementation of these arrangement are

delayed beyond three months from the date

the parties will be free to extend time

for implementation or act otherwise as

they deem fit.

(iv) This is, however, without prejudice

to the landlords right to obtain

enhancement of rent, if any, as

permissible under the law applicable.

7. The conclusions were as follows: -

(i) In interpretation of the escalation

clause for air-conditioning charges, the

Corporation agreed offer on the basis that

the electricity component of the airconditioning charges of 30 paise per sq.

ft. per month will be taken as 1.25 unit

per sq.ft per month of the so determined

30 paise air-conditioning charges.

Landlord agreed to this in final

settlement of their claim for increase in

the air-condition charges.

(ii) The Corporation would be willing to

refund a sum of Rs. 83,388.53 which was

recovered by the Corporation as liquidated

damages on account of late possession of

the three floors, on clear understanding

that the landlord will withdraw his

counter claim of rent amounting to Rs.

4,76,371.14 for the 95 period from 15-09-

1969 to 4-11-1970. The amounts are subject

to verification.

(iii) The Corporation would further be

willing to refund the several sums

totaling to Rs.20,392.03 which were

deducted by the Corporation out of the

rent, service charges and air conditioning

charges at various points of time. The

amount is subject to verification.

(iv) No interest shall be payable by IOC

on any of the amount payable in terms of

para (i), (ii) and (iii) above.

(v) with regard to IOC's request for space

on the ground floor for setting up a

generator, M/s. Sudera Enterprises Pvt

Ltd. agreed to provides space (already in

IOC's occupation) in the car parking area

on ground floor sufficient enough to

install generator. IOC agreed that in lieu

of the space to be provided by M/s. Sudera

Enterprises, ICC will provide to M/s.

Sudera Enterprises equal space of the car

parking area in front. M/s. Sudera

Enterprises will extend all cooperation to

enable IOC connect the generator to IOC's

electrical circuit as well as electricity·

supply meter etc.

8. It is understood by both the parties that

in future both the parties as will cooperate

and the conditions of air conditioning and

other facilities like lift and others will

run properly to the benefit of the both. For

this purpose, as the landlord has suggested,

the air distribution system (i.e. ducting and

false ceiling) located in the floors occupied

by IOC will have to be modified at the cost

of IOC, whereinafter it is agreed by the

landlord that the temperature of the premises

will be maintained at 78ºF ± 2ºF.

9. On the service charges, it was agreed that

the earlier claim of Rs. 0.06 unit per sft.

per month will be the basis for the element

of electricity consumption.

10. It was also agreed by the landlord that

one bigger size lift will be exclusively

given to the corporation besides the use of

service lift in lieu of the existing

arrangement.”

28. In order to appreciate the point, before we turn

to the pleadings, we may notice the following

correspondence between the parties. On 21.08.1990,

the appellant wrote to the Solicitors. It, inter

alia, reads as follows: -

“Under the Agreement of Lease dated

21/11/1968 executed by and between M/s Sudera

Enterprises (P) Ltd. (The Lessors) and M/s

Indian Oil Corporation Ltd. (the Lessee)

which is for a period of 21 years commencing

from the date of handing over possession to

the Lessee i.e., 4th Nov., 1970 we are

entitled to continue in occupation of the

leased premises upto 3rd November, 1991.”

We may also notice the following contentions

inter alia:

“You may however bear in mind that it is

covenant in the agreement of lease that so

long as any loan is outstanding against them,

they cannot determine the lease. Therefore,

due care has to be taken that while releasing

the Corporation's charge over the property we

do not expose ourselves to any threat or

coercion which may affect our peaceful

occupation of the premises during the term of

the lease and even thereafter, if required,

in accordance with the agreement and/or the

law.”

29. Next, we may notice the communication by a letter

dated 19.10.1990 sent by the respondent to the

appellant.

“SUDERA

Ref:01:001:0002:1520:10 OCTOBER 19,1990.

Indian Oil Corporation Limited,

1, Shakespeare Sarani,

Calcutta-700071.

Dear Sirs/

Re: 2nd / 3rd and 4th Floors of premises

known as Airconditioned Market - being No. 1,

Shakespeare Sarani, Calcutta - 700 071.

Please refer to the Registered Agreement for

Lease dated 21st November/ 1968 and the

Registered Supplemental Agreement for Lease

dated 12th September, 1969.

The possession of the 2nd and 3rd Floors was

delivered by us and taken by you on the 12th

September/ 1969 and that in relation to the

4th Floor was delivered by us and taken by

you on the 18th December, 1969. The agreed

period of Lease of 21 years in relation to

the 2nd and 3rd Floors has expired by efflux

of time on the 11th September, 1990 and that

in relation to the 4th Floor such agreed

period in due to expire by efflux of time on

17th December, 1990.

Consequently, we became entitled to peaceful

and vacant possession of the 2nd and 3rd

Floors on the expiry of 11th September, 1990.

Will you please let us know when you propose

to deliver possession of the 2nd and 3rd

Floor. We shall appreciate a line in

confirmation that you will deliver possession

of the 4th Floor on the expiry of the agreed

term on the 17th December/ 1990.

We have enjoyed a warm and cordial

relationship of land-lord and tenant over two

decades. We understand that your huge office

complex in South Calcutta is nearing

completion where you propose shifting. We

look forward to hear from you in the matter

immediately.

This is without prejudice to our rights and

contentions.

Thanking you,

Yours faithfully

for SUDERA, ENTERPRISES PVT. LTD.,

(B. S. BAID)

DIRECTOR”

30. The appellant sent the communication by a letter

dated 03.11.1990 which reads as follows: -

“INDIAN OIL CORPORATION LIMITED

1, SHAKESPEARE SARANI, CALCUTTA- 700 071

In reply, please refer to:

P&A/ER/1841

rd November, 1990

Messrs, Sudera Enterprises Private Ltd.

1, Shakespeare Sarani

Calcutta- 700 071

Dear Sirs

Re: 2nd, 3rd and 4th floor of premises No. 1,

Shakespare Sarani, Calcutta.

Kindly refer to your letter No.

01:001:0002:1520:10 of the 19th October, 1990.

We may mention that possession of the 2nd,

3rd and 4th Floors were delivered to us on

4th November, 1970 and not on 2nd September,

1969 as stated in your letter. The period of

the Lease has therefore not yet expired and

the question of delivering possession at this

stage does not arise.

Possession of the 2nd, 3rd and 4th Floors of

premises No. 1, Shakespeare Sarani, Calcutta,

will be delivered to you in accordance with

law.

Yours Faithfully,

FOR INDIAN OIL CORPORATION LTD.

(MARKETING DIVISION)

DY. GENERAL MANAGER, (PERSONNEL)

Regd. Office: G-9, Ali Yabar Jung Marg,

Bandra (East), Bombay- 400 051 (India)

Regional Office: 1, Shakespeare Sarani,

Calcutta-700 071.”

31. Next, we notice letter dated 09.11.1990 sent by

the respondent to the appellant.

November 9,1990

“The Indian Oil Corporation Ltd.

1, Shakespeare Sarani,

CALCUTTA- 700 071

Dear Sirs,

Re: Second, Third and Fourth Floors of

Premises No. 1 Shakespeare Sarani, Calcutta.

We thank you for your Letter No. P&A/ER/1841

dated the 3rd November, 1990 in reply to our

letter No.01 :001:0002:1520:10 dated the 19th

October, 1990.

We reiterate and maintain that the possession

of the 2nd and 3rd Floors were delivered to

you on the 12th September, 1969, and the

possession of 4th Floor was delivered to you

on 18th December, 1969 and not on 4th

November, 1970 as alleged.

According to us, the Lease has expired by

efflux of time and we are entitled to receive

and you are liable to make over possession of

the 2nd and 3rd floors in your occupation to

us. In respect of the 4th Floor the lease is

due to expire on 17th December, 1990, and you

are liable to make over possession to us on

the expiry of the lease.

You are aware of the astronomical increase of

prices on all counts. You are also aware of

the present prevailing market conditions as

to rent service and Air-conditioning charges.

For the interim period from September, 1990

in respect of 2nd & 3rd floors, until you

deliver possession of such floors in your

occupation on the alleged expiry of the Lesse

which according to you would be in November

1991, we request you to pay us mesne profits

or occupation charges having regard to the

prevailing market conditions. According to us

the prevailing rent, service and Airconditioning charges for similar or nearly

similar property in the locality would be

Rs.31/- per sq. ft.

On account of the cordial relationship

between us, we shall be obliged if you

consider and let us have your agreement for

payment of the mesne profit or occupation

charges at the aforesaid rate or such other

reasonable rate as we may arrive at mutually

and agree, for which we hereby offer to sit

across the table and discuss the same with

you.

We look forward to hear from you at the

earliest.

Yours faithfully,

For Sudera Enterprises Pvt. Ltd .

Sd/-

DIRECTOR”

32. The respondent writes on 02.01.1991, with

reference to a letter dated 11.12.1990, which is as

follows, inter alia.

“Ref: 01:001:0002:1520:16 January 2, 1991

Indian Oil Corporation Ltd.

1, Shakespeare Sarani,

Calcutta - 700 071

Dear Sir,

Re: 2nd, 3rd and 4th floor of premises

No.1, Shakespeare Sarani, Cal- 700 071

We acknowledge receipt of your letter dated

11th December, 1990 and note its contents

with utter surprise.

At the outset we repeat and reiterate the

statements and contents of our earlier

letters to you and state that the same are

true and correct and deny and dispute all

allegations to the contrary.

Without prejudice to our rights and

contentions and without in any manner

admitting any of the allegations contained in

your instant letter, we are accepting the

cheques for a total sum of Rs.4,41,896.58

(Rupees four lacs forty-one thousand eight

hundred and ninety-six and paise fifty-eight

only) as an on-account payment of our dues in

relation to your occupation of the second and

third floors.

This is strictly without prejudice. All

allegations contrary to the aforesaid are

denied and disputed.

Thanking you,

Yours faithfully

For SUDERA ENTERPRISES PVT. LTD.

Sd/-

(P.N. TICKOO)

CHIEF EXECUTIVE”

33. Next, we notice in communication letter dated

04.11.1993 sent by the appellant to the respondent.

“Ref: DGM (HR)/1

Date: 04.11.93

M/s. Sudera Enterprises (P) Ltd.

1, Shakespeare Sarani

Calcutta-700 071

Sub: Our tenanted office area at 2nd, 3rd and

4th floors of Premises No.1, Shakespeare

Sarani, Calcutta- 700 071

Dear Sir,

We have received your letters dated 20th

September, 1993 on 1.10.93 and dated 8.10.93

on 12.10.93.

We have noted that the proposal of the Flat

Deleasing Committee conveyed to you by Shri

Janakraj Gupta, has not been accepted by you

and you want to keep your claim for alleged

mesne profit alive. We make it clear that the

suggestion conveyed by you is not acceptable

to us. The premises in question is still

required by us and our valuable articles and

assets are still lying therein. We shall pay

you rent at the last rate paid so long we

continue in the possession of the aforesaid

premises and that is all that we

are obliged to pay to you and you are

entitled to get from us. There is no scope

for any genuine or real claim for mesne

profits/damages and the question of

arbitration does not arise.

The rights and obligations are governed by

the West Bengal Premises Tenancy Act. It is

totally incorrect to allege that the

Corporation is in possession of the premises

without any authority.

We take strong obligation to your appointing

a date for taking over possession as you have

purported to do by the above letter. We are

shocked and surprised to learn that you had

actually sent your man to take over forcible

possession of the tenanted premises but you

failed. We never gave you notice that we

would quit the tenanted area on October 1,

1993. This wrongful act of yours is serious

and pose a serious threat of damage and loss

of our valuable articles lying in the

tenanted area. Please do not

repea1 any attempt of taking over forcible

possession.

We refer to our earlier correspondences and

we reiterate that after the expiry of the

lease period we have been holding over as a

monthly tenant at a rent of Rs.2, 15,460. 77.

The monthly rent is being regularly paid to

you. We are, as conveyed to you, not liable

to pay air-conditioning charges.

We hope that we have clarified the matter and

there will be no misunderstanding any

further.

We, however, do not appreciate your objective

to get back possession of our tenanted area

and at the same time to keep alive your

unreasonable and illegal claim for mesne

profits/damages. Your stand should also be

fair and reasonable as ours.

Yours faithfully,

F/lndian Oil Corporation Ltd.

Sd/

(S. Basu)

Dy. General Manager (HR)

34. On 02.05.1994 the respondent refers to certain

discussions and notes. It was agreed in the

discussions that the appellant would hand over the

lease property inclusive of the furnitures, fixtures,

fittings thereon, on as is where is basis, which was

also agreed to be purchased by the respondent. It was

allegedly agreed that the claim for mesne profits

would be looked into by the chairman of the appellant

and therefore the respondent would not insist on

reference to arbitration. By letter dated 24.05.1994

the appellant wrote as follows:

“WITHOUT PREJUDICE

No.: HO:LAW:REC:1476:PT 24th May, 1994

Mis. Sudera Enterprises Pvt Ltd.

1, Shakespeare Sarani, ·

CALCUTTA- 700 001

Dear Sirs,

We refer to your letter dated 2.5.94. It is

correct that discussions were held on

27.4.94. It is not however correct to say

that any question of delivery of possession

on the ground of expiry of the lease was

raised or discussed. IOC. has repeatedly

pointed out to Sudera that IOC enjoys the

status of a monthly tenant governed by the

West Bengal Premises Tenancy Act, 1956. Be

that as it may, with regard to the text of

the discussions recorded in your letter our

comments are as follows:

Clauses (i), (ii) and (iii) are substantially

correct save and except that the possession

is to be taken over by you immediately and

the claim for proportionate share of

Corporation taxes however will be ascertained

on production of proof and verification by

IOC in regard to tax liability. We may

therefore, request you to produce immediately

the necessary documentary proof to evidence

the extent of the tax liability to IOC,

Eastern Region.

So far as clauses (iv) and (v) are concerned,

it was discussed that Chairman will first

decide the question of maintainability of

your claim for mesne profits.

IOC has been consistently contending by

several letters to you that there can be no

question of mesne profits in this case. If

the Chairman decides that the claim for mesne

profits is maintainable in law after hearing

the view points of both sides in the matter

only then he will go into the question of the

assessment of the amount thereof.

You were kind enough to say that you would

accept the advice of the Chairman on every

respect as final and binding. At the same

time you will appreciate that no agreement

for arbitration agreement was concluded or

entered into. A draft was never finalized and

no agreement for arbitration was ever finally

prepared nor signed by any party because

talks for arbitration fell through at the

stage of discussions.

The appropriate Deed of Re-Conveyance of

Mortgage will be registered by IOC

immediately after the possession is taken

over by you.

We may therefore request you to depute your

representative to take over possession of the

property including· furniture, fittings, and

fixtures etc. in consultation with Executive

Director of our Eastern Regional Office at

Calcutta on the above basis.

Yours faithfully

for INDIAN OIL CORPORATION LIMITED

Sdl-

(G.R. RAMACHANDRAN)

DY. GENERAL MANAGER (LAW)”

35. Now, we may refer to the relevant pleadings

contained in the written statement filed by the

appellant. They are as follows: -

“Paragraph 7. With reference to paragraph 11

and 12 of the plaint, it is stated that the

Plaintiff by a Notice dated 7th December,

1977 had determined the tenancy and called

upon the Defendant to forthwith vacate the

three floors of the said premises. The

Defendant did not vacate. Thereafter, the

Plaintiff filed the suit No.20 of 1978 in the

Hon'ble High Court at Calcutta claiming a

decree for possession against the Defendant.

The said suit No.21 of 1978 was ultimately

not pressed and was dismissed on 20th June,

1986. The Defendant contained to occupy the

said three floors of the said premises as

before and paid monthly rents and other

charges as before to the Plaintiff and the

Plaintiff continued to accept the same month

by month. Thereafter, by the letter dated

19th October, 1990 the Plaintiff again called

upon the Defendant to make over. possession

of the said 2nd, 3rd and 4th floors of the

said premises to which a reply was given by

the Defendant on 3rd November, 1990. Since

the possession of the said 2nd, 3rd and 4th

floors of the said premises was delivered to

the Defendant on 4th November, 1970 the

period

of 21 years of the said lease had not expired

on 19th October, 1990 and the Defendant had

no obligation to give possession. It is

denied that the contention raised in the

letter dated 3rd November, 1990 are wrongful,

it is denied that by the said letter dated

3rd, November, 1990 the Defendant gave notice

to quite on the expiry of the period of 21

years as alleged.”

“Paragraph 8. With reference to paragraph 13

of the plaint it is stated that the period of

21 years expired on 4th November, 1991 and

all allegations to the contrary are denied

and disputed.”

36. In paragraph 10, the appellant purported to offer

reasons for delay in vacating.

37. In paragraph 11, it is, inter alia, stated with

reference to paragraph 15 of the plaint that the

contractual tenancy of the appellant stood terminated

on 31st May, 1994 and possession was delivered on 31st

May, 1994.

38. In answer to paragraph 16 of the plaint, it is

stated as follows in paragraph 12.

“Paragraph 12. With reference to paragraph 16

of the plaint, it is denied that the

defendant was over in wrongful possession of

the said three floors of the said premises as

alleged in the said paragraph or at all. Each

and all the allegations in the said paragraph

are denied and disputed. The defendant was

the lessee of the said three floors of the

said premises for a term of 21 years with

option to determine the said lease and

deliver possession before the expiry of the

said period of 21 years. The provisions of

the west Bengal Premises Tenancy Act, 1956

were applicable and the possession of the

defendant of the said three floors of the

said premises was protected by the said Act.

Alternately, the Defendant was a monthly

tenant in respect of the said three floors of

the said premises. The defendant has paid

monthly rent to the Plaintiff month by month

and the Plaintiff has accepted rent and

issued rent receipts to the defendant

regularly. Such tenancy of the defendant was

all along protected and governed by the West

Bengal premises Tenancy Act, 1956. No decree

for delivery of possession of the said three

floors has

been obtained by the Plaintiff against the

defendant. The Plaintiff purported claim of

mesne profit is totally misconceived in law

and in the facts of the case.”

39. We may also notice Paragraph 13 and Paragraph 16.

“Paragraph 13. In further alternative,

Plaintiff has after determination of the

tenancy by the Notice dated 7th December,

1977 accepted monthly rent from the defendant

month by month and have issued rent receipt

and accordingly, the Defendant became a

monthly tenant in or after January, 1978. The

said tenancy of the defendant was also

protected and governed by the provisions of

West Bengal Premises Tenancy Act, 1956.”

“Paragraph 16. With reference to paragraph 19

of the plaint it is denied that the Defendant

was ever in wrongful possession of any of the

floors of the said premises after the expiry

of 3rd /4th November, 1991 or at all. The

defendant was a tenant within the meaning of

West Bengal Premises Tenancy Act, 1956 till

31st May, 1994, when possession was delivered

back to and accepted by the Plaintiff as

mentioned before. The defendant has not been

in wrongful occupation or possession of any

portion of the said premises even for a

single day. The purported claim for mesne

profit as made in the suit is wholly

misconceived and not maintainable.”

40. The learned Single Judge drew inspiration from

the judgment of this Court in Pabitra Kumar Roy

(supra), that when the party allows the lease to run

its full course and it cannot thereafter take shelter

under the clause for earlier determination to contend

that the lease is governed by the ‘Tenancy Act’.

41. As far as the case based on the Calcutta Credit

Corporation Ltd.(supra), the learned Single Judge

went on to find that the appellant continued to

remain in possession of the 3rd/ 4th floors till it

vacated the same in 1994. It was further found that

the parties did not act on the basis of the notice of

termination. The cross suits were withdrawn on

agreement. The parties decided to refer the question

of quantum of mesne profits to be pronounced upon by

the chairman. All these facts, it was found, taken

together would show that the notice of termination

was not acted upon. In regard to this aspect, we may

now also notice the findings in the impugned

judgment. The Division Bench found that it is not

open to a party to set up a new case in departure

from the pleadings relying on Pabitra Kumar Roy

(supra). It was found that mere inclusion of a prior

determination clause will not alter the character of

the lease for a fixed period unless the option is

exercised. No evidence on record was found to show

that the appellant took steps to exit the lease

before May, 1994. In not choosing to exercise the

option of prior determination and instead of allowing

the lease to run its full course, the appellant

cannot take refuge under the ‘Tenancy Act’. Dealing

with the argument that a fresh tenancy was created

after the expiry of the efflux of time, it was found

that the appellant had not pleaded such a case and

that the respondent had assented to the appellant

continuing in possession of the lease premises. The

occupation charges were accepted by the respondent

without ‘prejudice’ which did not lead to the

creation of a new tenancy. We have found that we see

no reason to disagree with the High Court that the

term of lease was 21 years from the date on which the

three floors in question was handed over. We further

found that in regard to the 2nd and 3rd floors,

possession must be found handed over to the appellant

on 16.09.1969. As far as the 4th floor is concerned,

we affirmed the finding of the High Court that

possession was handed over only on 04.11.1970. There

is also no dispute that the parties namely the

appellant and the respondent could determine the

lease prior to the expiry of 21 years. It cannot be

in the region of dispute that the respondent did

issue a notice dated 12.12.1977. The respondent

followed it up by filing a suit, C.S. No. 20 of 1978,

claiming possession. There was also a cross suit

filed by the appellant. We have noticed how both

these suits finally came to be compromised. The

argument which we are called upon to pronounce on is

as follows.

42. It is contended that with the issuance of the

notice of termination of the lease by the respondent

dated 12.11.1977, the original lease at any rate came

to an end. The result of the settlement between the

parties would not be to revive the original lease. In

other words, upon the issuance of a notice for

determination of the lease under Section 106 of the

Transfer of Property Act, without anything more, the

law operates and the lease is at an end. The effect

of the waiver of the notice under Section 113 of the

Transfer of Property Act can only be if at all to

create a new tenancy. It is in this regard, that the

appellant has placed reliance on judgment of this

Court in Calcutta Credit Corporation Ltd. (supra).

The judgment was rendered in the said case by a bench

of three learned judges. In the said case, after the

expiry of the period of the original lease, the

tenant continued to hold over the premises. While so,

it is the tenant who served a notice intimating its

intention to vacate the premises on 12.08.1953. By a

subsequent letter dated 26.08.1953, the tenant

purported to resile from the notice and requested

that the earlier notice be treated as cancelled. The

landlord pointed out that the earlier notice could be

withdrawn by mutual consent and the landlord was

unable to give his consent. The tenant invoked the

Rent Control Act and claimed they were holding over

the premises in terms of the Act. The tenant sub-let

the premises after it was called upon to vacate the

premises. The landlord instituted the suit against

the original tenant. There was a consent decree which

inter alia declared that portion of the premises was

handed over to the landlord and the landlord would

have the option to eject the sub tenant. It is

thereupon that the suit came to be filed against the

sub tenant. This Court proceeded to hold, inter alia,

as follows: -

“Clearly Section 113 contemplates waiver of

the notice by any act on the part of the

person giving it, if such an act shows an

intention to treat the lease as subsisting

and the other party gives his consent express

or implied thereto. The law under the

Transfer of Property Act on the question in

hand is not different from the law in

England. Once a notice is served determining

the tenancy or showing an intention to quit

on the expiry of the period of the notice,

the tenancy is at an end, unless with the

consent of the other party to whom the notice

is given the tenancy is agreed to be treated

as subsisting. It was held in Tayleur v.

Wildin [(1867-68) LR 3 Ex Cases 303] that a

notice determining a tenancy cannot be

withdrawn. In Tayleur v. Wildin [(1867-68) LR

3 Ex Cases 303] an annual tenancy of a farm

under a written lease commencing on Lady Day

i.e. March 25, was determined by a notice by

which the landlord called upon the tenant to

quit the farm at the expiration of the

current year's tenancy. Before the expiry of

the year of tenancy, the arrears of rent were

paid up by the tenant, and the notice was

withdrawn and the tenant continued in

occupation of the farm under the terms of the

original agreement. It was held by the court

of Exchequer that the tenancy was determined

by the notice to quit, and a surety for

payment of rent under the original lease was

not liable for rent falling due after the

expiry of the notice. Kelly C.B., observed

that whether the notice is given by the

landlord or the tenant, the party to whom it

is given is entitled to insist upon it, and

it cannot be withdrawn without the consent of

both. The consent of the parties makes a new

agreement, and the rent became, due under a

new agreement. In our judgment, that

principle applies to the law of landlord &

tenant in India. Therefore, on the expiration

of the period of notice dated August 12,

1953, the tenancy of Allen Berry stood

determined.

(Emphasis supplied)

43. The appellant highlights this judgment. We have

noticed that the appellant did refer to this judgment

both before the learned Single Judge and the Division

Bench. A Bench of two learned Judges in the decision

reported in Ranjit Chandra Chowdhury v. Mohitosh

Mukherjee9, was dealing with a suit for ejectment

filed against the tenant for default of payment of

rent. The matter was considered in light of the West

Bengal Premises Rent Control (Temporary Provisions)

Act, 1950. The said act came to be repealed by the

‘Tenancy Act’ with which we are concerned in this

case. The court was dealing with the scope of Section

12(1) and (14) of the Act. Under the said provisions,

the prohibition against a decree for possession being

granted against tenant did not apply in a case where

the tenant had fallen into arrears of rent and had

not paid it within the time under the contract. The

tenant claimed the protection of Section 14 of the

Act which granted power to the court to decree the

payment of arrears and allow the tenant to avoid the

consequences which otherwise would follow. The

9 (1969) 1 SCC 699

contention was that the action of the landlord in

having accepted the rent on a subsequent date had led

to the creation of a new tenancy. The Court inter

alia held in these circumstances as follows: -

“8. Mr Bhattacharji on behalf of the tenant

contends that the old tenancy was dead after

the notice and on acceptance of rent a new

tenancy came into existence. The other side

contends that by the acceptance of rent, the

old tenancy on the old terms continued. Each

side has cited a number of rulings. We do not

consider it necessary to refer to these

rulings or to discuss the question. In Ganga

Dutt Murarka v. Kartik Chandra Das [AIR 1961

SC 1067] and in Anand Nivas Private Ltd. v.

Anandji Kalyanji Pedhi [AIR 1965 SC 414]

(particularly the first at p. 1069), it was

held in connection with a statutory tenancy

that a landlord accepting rent does not

assent to a new contractual tenancy but

continues the old tenancy. In Calcutta Credit

Corporation Ltd. v. Happy Homes (P) Ltd.,

[(1968) 2 SCR 20] the subject has been

discussed in detail. Under Section 113 of the

Transfer of Property Act a notice is waived,

by an act on the part of the person giving it

showing an intention to treat the lease as

subsisting, provided there is the express or

implied consent of the person to whom it is

given. Here the difficulty is solved by the

attitude the tenant took in this case. His

case was that the old tenancy revived and

continued. According to him, the landlord

acquiesced in having the old tenancy

continued. If we go by the tenant's own case,

it is obvious that the old tenancy with the

default continued and the landlord was thus

able to use the provisions of Section 12

(1)(i) against the tenant as also the proviso

to sub-section (3) of Section 14 of the

repealed Act. There were two consecutive

defaults and in the period of 18 months there

were more than three defaults. The benefit of

Section 14 sub-section (1) of the repealed

Act is not available to the tenant because of

the operation of the proviso to sub-section

(3). Further Section 24 of the new Act can

hardly assist the tenant. That section is not

retropective and will operate from the date

on which it came into force. Mr Bhattacharji

claimed that it may be taken as a rule of

decision or laying down a rule of evidence

but we think it impinges upon the substantive

rights of landlord and tenants which can only

be claimed after the commencement of the Act

and not before. The section puts an embargo

on any claim based on default in payment of

rent when the landlord accepts rent after

default and therefore it affects the

substantive right of the landlords. According

to the accepted canons of interpretation of

statutes, a substantive right cannot be taken

away retrospectively unless the law expressly

so states or there is a clear intendment.

There are no express words in the statute

making Section 24 retrospective and we fail

to see any intendment in it to apply to cases

pending on March 31, 1956, when the new Act

came into force, and this suit was then

pending. If it had been merely a matter of

procedure or creating a rule of decision we

might have held that the provisions applied

to the suit, but that is not the case here.

As we said the section creates a change in

the substantive rights and therefore must be

held to be prospective in operation and not

retrospective unless we can gather

retrospectivity from the language of the

statute or by clear implication in it.

44. A Bench of three learned Judges rendered the

decision reported in Tayabali Jaffarbhai Tankiwala v.

Asha & Co. and Another10. We may notice the following

paragraphs: -

“5. In the present case there can be no doubt

that the serving of the second notice and

what was stated therein together with the

claim as laid and amplified in the plaint

showed that the landlord waived the first

notice by showing an intention to treat the

tenancy as subsisting and that this was with

the express or implied consent of the tenant

to whom the first notice had been given

because he had even made payment of the rent

which had been demanded though it was after

the expiration of the period of one month

given in the notice.”

“6. It further appears that the rent was sent

by the tenant treating the tenancy as

subsisting and not as having come to an end

by virtue of the first notice. There is

another significant fact which shows that it

was the second notice which was considered by

the landlord to be the effective notice. It

was in the notice sent in October 1957 that

the landlord, for the first time, raised the

ground of personal necessity. In the suit

requirement of personal necessity was made

one of the main grounds on which eviction was

sought. In the first notice which was sent in

June 1956 no such requirement or ground had

been mentioned. It was not open, therefore,

to the landlord to say that he did not want

to rely on the second notice and should be

allowed to base his action for eviction only

on the first notice containing the ground of

10 (1970) 1 SCC 46

the default in payment of arrears of rent. We

are satisfied that the suit of the landlord

was rightly dismissed though we have

sustained its dismissal on different

reasoning.”

45. We must pause here and notice the complaint of

the appellant. The learned Additional Solicitor

General would point out that in the Calcutta Credit

Corporation Ltd. (supra) case, the Court had declared

the law to be that when there is a waiver of a notice

within the meaning of Section 113 of the Transfer of

Property Act, the old tenancy is not resurrected.

With the issuance of the notice of termination, the

lease is determined. With the consent of the parties

all that happens is the creation of a new tenancy. It

is the complaint of the appellant that properly read

the judgment of the later bench of two judges

reported in Ranjit Chandra Chowdhury (supra) would

show that though reference is made to Calcutta Credit

Corporation Ltd. (supra), the Court proceeded on the

basis that the old tenancy was revived and continued

on the basis of the stand taken by the tenant

himself. It is pointed out that this Court must

proceed on the basis of law declared in Calcutta

Credit Corporation Ltd. (supra) and must notice also

that the facts persuaded the court to take the view

it took in the later judgment.

46. Still further, it is contended that as far as the

judgment of the later three judges’ bench in Tayabali

Jaffarbhai Tankiwala (supra), it does not refer to

the earlier judgment of a coordinate Bench of same

strength, namely, Calcutta Credit Corporation Ltd.

(supra) and the law is correctly laid down in

Calcutta Credit Corporation Ltd.(supra).

47. Per contra, the submission of the respondent is

that the observations relied upon by the appellant in

Calcutta Credit Corporation Ltd. (supra) constitute

only obiter. Reliance is placed on the judgments in

Ranjit Chandra Chowdhury (supra) and Tayabali

Jaffarbhai Tankiwala (supra) to contend that the

waiver does not lead to a new tenancy. In this

regard, reliance is also placed on the judgments of

the Calcutta High Court reported in Sudhir Kumar Paul

v. Indu Prova Ghose and others11 and Khana Lahiri and

others v. Suniti Kumar Chatterjee and others12. It is

further pointed out that the parties proceeded on the

basis that the old tenancy revived. This is evident

from the rent being paid in accordance with the lease

by the appellant.

48. We have adverted to the stand of the appellant in

its written statement. In paragraph 12, the appellant

contended that it was a lease for a term of 21 years

with an option to determine the said lease before the

expiry of said period of 21 years. Immediately

thereafter, the Tenancy Act was invoked. Thereafter,

it is in the same paragraph, it is contended that the

appellant is a monthly tenant. It had paid monthly

rent on a month-by-month basis. Such tenancy is

protected by the Tenancy Act. Further alternative

argument set up is that after determination of the

tenancy by notice dated 07.12.1977, the monthly rent

being accepted, appellant became monthly tenant on or

after January, 1998 and the tenancy was also

11 AIR 76 Cal 274

12 (2006) SCC Online Cal 248

protected under the Tenancy Act. Now it is necessary

to refer to Section 3 of the West Bengal Premises

Tenancy Act, 1956. It consists of two sub-sections.

Sub-Section (2) was inserted in the year 1965.

Section 3 reads as follows:

“3. Certain provisions of the Act not to

apply to certain leases. — (1) The provisions

relating to rent and the provisions of

Sections 31 and 36 shall apply to any

premises held under a lease for residential

purpose of the lessee himself and registered

under the Indian Registration Act, 1908,

where—

(a) such lease is for a period of not more

than 20 years, and save as aforesaid nothing

in this Act shall apply to any premises held

under a lease for a period of not less than

15 years.

(2) Notwithstanding anything to the contrary

contained in sub-section (1) but subject to

sub-section (3) of Section 1, this Act shall

apply to all premises held under a lease

which has been entered into after the

commencement of the West Bengal Premises

Tenancy (Amendment) Ordinance, 1965:

Provided that if any such lease is for a

period of not less than 20 years and the

period limited by such lease is not expressed

to be terminable before its expiration at the

option either of the landlord or of the

tenant, nothing in this Act, other than the

provisions relating to rent and the

provisions of Sections 31 and 36, shall apply

to any premises held under such lease.”

49. We understand the case of the appellant from the

pleadings as follows:

The lease provided for an option for appellant

to determine the lease before the expiry of 21

years. Therefore, though the lease was for a

period of 21 years, the lease contained an

option to terminate it with the appellant.

Therefore, the provisions of the Tenancy Act

came into play. It is in further alternative in

paragraph 30 that the appellant set up the case

of the impact of the notice of termination dated

7.12.1977. It is in support of the said

alternative case that the entire debate before

the court based on the judgment of this Court in

Calcutta Credit Corporation Ltd. (supra)

revolved around.

50. We have held that the lease agreement in 1968

along with the supplementary agreement in 1969 did

constitute a lease. In Clause 9 of the agreement of

lease dated 21.07.1968, it is provided as follows:

“9. That Lessee shall be at liberty to

terminate the lease at any time after the

expiration of eight years of the terms of 21

years by giving six calendar month previous

notice in writing to the Lessor to that

effect.”

51. We must notice Clause 26 of the said lease. It

reads as follows:

“26. In case the Lessee makes default in

payment of the rent for three months or

otherwise commits breach of any of the

covenants or conditions on its part to be

observed and performed it shall be lawful

(but not compulsory) for the Lessor to

determine the Lease and to re-enter the

demised premises or any part thereof in the

name of the whole and to take possession

thereof.”

52. The supplementary agreement dated 12.09.1969

added a proviso to Clause 26. It reads as follows:

“PROVIDED HOWEVER that notwithstanding

anything contained in the said Agreement of

Lease or these presents the Lessor shall not

be entitled to forfeit the Lease in respect

of the demised premises or any part thereof

or to determine the same or to re-enter

thereon so long as any amount of the loan or

loans advanced and agreed to be advanced and

the amount of Interest thereon are

outstanding and due to the Lessee.”

53. If thus Clause 26 read with the proviso is

considered, right to forfeit and to determine the

lease stood conditioned by the requirement of the

payment of the amounts to the appellant under the

mortgage. There is no pleading at all in this

regard. The notice of termination by the respondent

is not tendered in evidence as pointed out by the

respondent. We have noticed the contents of the

letter dated 08.03.1990 which clearly indicate that

the appellant had in mind the proviso to Clause 26

which we have hereinbefore referred to. In

paragraph 12 of the written statement, the case

which was set up was that under the terms of the

lease agreement and supplementary agreement, the

lease has been made expressly terminable before its

expiry at the option of the appellant. This appears

to be the case with reference to Clause 9.

54. As regards the case based on the effect of the

waiver within the meaning of Section 113 of Transfer

of Property Act, we notice the following aspects.

The notice of termination is itself not produced.

In this regard, we must notice that the judgment of

this Court in Calcutta Credit Corporation Ltd.

(supra) was rendered under Section 113 of the

Transfer of Property Act. Waiver of forfeiture

within the meaning of Section 111 (g) of the

Transfer of Property Act is provided in Section 112

of the Transfer of Property Act. The considerations

relevant for the operation of the Section 112 is

different from that of Section 113 of the Transfer

of Property Act. Since the notice itself is not

before the Court, things are not clear. There is no

adjudication about the notice of termination in the

earlier suit. We have also noticed the proviso to

clause 26. We have seen the stand of the appellant

even in the year 1990 as made clear from the letter

dated 21.08.1990 addressed by it to its solicitors.

There is no case as to when the appellant stood

paid. This is also relevant for the reason that the

notice of termination referred to by the appellant

dated 07.12.1977 if not legally permissible at the

time when it was issued, it would not in law have

the effect of determining the lease which was for a

period of 21 years. In the circumstances of this

case, we find no merit in the case of the appellant

based on the decision of this Court in Calcutta

Credit Corporation Ltd. (supra) as regards the

effect of waiver under Section 111 of the Transfer

of Property Act resulting in the creation of the new

tenancy.

55. As regards the case based on Section 3(2) of the

Tenancy Act, namely, the presence of an option with

the appellant /lessee to terminate the 21 years

lease immaturely, it is no doubt true that Clause 9

did give an option to the appellant to terminate

lease after the expiry of 8 years and before the

period of 21 years expired. It is here that the

decision of this court in Pabitra Kumar Roy (supra)

needs to be considered. In the said case, registered

lease was dated 13.01.1969. The lease commenced from

01.01.1969 and was for a period of 21 years. The

lease, in fact, contained a clause which permitted

the parties to terminate the lease prior to its

expiry. On 29.09.1972, the lessor determined the

lease under Section 111(g) of Transfer of Property

Act. What is more, a suit was filed against the

lessee for eviction which was decreed on the ground

of default in paying rent. The lessee went ahead and

successfully invoked Section 114 of the Transfer of

Property Act and on payment of the rent, he was

allowed to continue. Thereafter, on completion of

the period of 21 years, the suit for ejectment was

filed. It is in this case that the tenant sought

shelter under Section 3 of the Tenancy Act. It was

the case of the tenant that the tenant was protected

under the Tenancy Act, in view of the prior

determination. We need only notice paragraphs 15,

19, 20 and 22.

“15. On a construction of the provisions of

sub-section (2) of Section 3 of the 1956 Act,

we are unable to subscribe to the view

expressed by the High Court. The intention of

the legislature in amending Section 3 appears

to have been to prevent landlords from using

long-term leases as a camouflage for

excluding them from the protection of the

1956 Act and yet retaining the right of prior

determination. Sub-section (2) appears to

have been enacted to prevent such abuse,

inasmuch as, once the lease was determined

before the fixed period, it attracted the

proviso thereof.

xxx xxx xxx

19. The decision in Savita Dey case [(1995) 6

SCC 274 : AIR 1996 SC 272] makes the position

clear that the mere inclusion of a clause for

prior determination of a lease, which is

otherwise for a fixed period of more than

twenty years, will not ipso facto bring it

within the exception contemplated in the

proviso to sub-section (2) of Section 3 of

the 1956 Act. The inclusion of such a clause

may be taken by the tenant as a defence in

the event the option under the said clause is

exercised. Such a defence was not set up by

the lessee in the earlier suit when it was

available to her and the same is not

available to her after the lapse of the fixed

period of the lease.

20. As was indicated by the Calcutta High

Court in Mahindra & Mahindra case [(1989) 93

CWN 773 : AIR 1989 NOC 200 (Cal) : (1989) 1

CHN 1] a lease for a fixed period does not

cease to be so by the inclusion of a clause

entitling either the lessor or the lessee to

determine the lease prior to its expiry,

unless such option is actually exercised.

xxx xxx xxx

22. The law is clear that lease deeds for

periods of twenty years or more would stand

excluded from the operation of the 1956 Act

except in matters relating to Sections 31 and

36 thereof, unless the same were terminable

before their expiration at the option either

of the landlord or of the tenant. In other

words, if such a lease is terminated before

its fixed period expired, the proviso to

Section 3(2) would be attracted as a defence

against eviction. If, however, the lease was

allowed to run its full course, both the

lease and the conditions contained therein

would come to an end and would cease to be

operative and the clause for prior

determination would no longer be available as

a defence against eviction.”

56. The Court also found that the tenant was

estopped having submitted to the jurisdiction of the

court under the Transfer of Property Act by seeking

relief under Section 114 of the Transfer of Property

Act. Since the Court has also relied upon the

judgment of this Court in Savita Dey v. Nageswar

Majumdar and Another13, we may advert to the same.

In the said judgment, the Court was dealing with the

lease which commenced on 01.07.1964 and ended on

30.06.1985. It was found that since lease was

executed prior to the amendment inserting subsection (2) in Section 3 in 1965, the tenant could

not succeed on the basis of the pre determination

clause. We may also notice the following discussion:

“8. Additionally, in the lease in hand,

neither the landlord nor the tenant had

13 (1995) 6 SCC 274

reserved to himself the unfettered right of

termination of the lease during the period of

21 years. In the first place, as are the

facts pleaded, neither of them has ever

asserted the said right of premature

termination. Perhaps no occasion arose.

Secondly, the question of the suggested

precariousness of the tenure did not arise in

the circumstances of the case because the

lessee/tenant had fully enjoyed the period of

lease of 21 years. The heart of the matter is

that the tenancy was never terminated either

by the landlord or by the tenant during the

period of the lease.”

57. In this case it is no doubt true that there is

pre-determination clause which gave an option to the

appellant to determine the lease after a period of 8

years. From the evidence and the stand taken by the

appellant as emerging from the documents, it is

clear that the appellant continued for the full

length of 21 years in terms of the lease. Its

possession was never ruffled. The appellant also

filed a suit. During the entire period after the

execution of the deed in 1968 and the supplementary

lease deed in 1969, it would appear that till the

period of 21 years ran out, appellant never took up

the case based on its right under the West Bengal

Premises Tenancy Act in view of the option it had to

determine the lease under Clause 9. The presence of

the clause in question is not to be confused with

the issue relating to the effect of the notice dated

07.12.1977 purported to have been sent to the

respondent which we have separately dealt with.

Therefore, in terms of Pabitra Kumar Roy (supra),

the appellant may not succeed on the strength of the

option it claimed under the agreement to lease.

IS LETTER DATED 19.10.1990, A NOTICE UNDER

SECTION 106 OF THE TRANSFER OF PROPERTY ACT?

58. The appellant would contend that there was a pre

mature determination of the lease vide letter dated

19th October, 1990 and this would result in the

occupation of the appellant from the said date being

as a monthly tenant and, therefore, the Tenancy Act

applied. It is the case of the respondent that this

contention was not raised before the courts below

and the contention which was raised before the High

Court was that it became the monthly tenant in 1991

on the basis of holding over of possession after the

expiry of the lease. The case of the respondent

further is that it must be understood that the

letter dated 19.10.1990 was one only enquiring

whether the appellant would deliver possession of

the 2nd and 3rd floors. The letter adverts to the

lease expiring by efflux of time. We are of the view

that there is merit in the contention of the

respondent. We cannot on the terms of the letter

dated 19.10.1990 hold that it amounted to

termination of the lease. We have found that there

was a lease for a term of 21 years commencing in the

case of the 2nd and 3rd floors from 17.09.1969.

Therefore, the period of 21 years had already run

out by the time the letter dated 19.10.1990 came to

be issued. In other words, it was a case of a lease

qua the 2nd and 3rd floors which had expired by

efflux of time, in September, 1990. We reject the

argument of the appellant in this regard.

MESNE PROFITS: WAS THE POSSESSION OF THE

APPELLANT WRONGFUL ON THE EXPIRY OF THE LEASE?

59. Section 111(a) of the Transfer of Property Act,

1882 provides that the lease is determined by efflux

of time. On the expiry of the lease, the lease ends.

As to its effect, we may only notice the following

statement in the decision reported in Atma Ram

Properties (P) Ltd. v. Federal Motors (P) Ltd.14:

“11. Under the general law, and in cases

where the tenancy is governed only by the

provisions of the 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 any rate at

which the landlord could have let out the

premises on being vacated by the tenant.…”

60. A tenant continuing in possession after the

expiry of the lease may be treated as a tenant at

sufferance, which status is a shade higher than that

of a mere trespasser, as in the case of a tenant

14 (2005) 1 SCC 705

continuing after the expiry of the lease, his

original entry was lawful. But a tenant at sufferance

is not a tenant by holding over. While a tenant at

sufferance cannot be forcibly dispossessed, that does

not detract from the possession of the erstwhile

tenant turning unlawful on the expiry of the lease.

Thus, the appellant while continuing in possession

after the expiry of the lease became liable to pay

mesne profits.

LIMITATION: WHETHER THE SUIT IS BARRED IN

RELATION TO MESNE PROFITS BEYOND 3 YEARS OF THE

SUIT?

61. Order VII Rule 6 of the CPC reads as follows:

“VII (6). Grounds of exemption from

limitation law. —

Where the suit is instituted after the

expiration of the period prescribed by the

law of limitation, the plaint shall show the

ground upon which exemption from such law is

claimed:

Provided that the Court may permit the

plaintiff to claim exemption from the law of

limitation on any ground not set out in the

plaint, if such ground is not inconsistent

with the grounds set out in the plaint.”

62. A perusal of the plaint filed would, inter alia,

reveal, the following pleading:

“24 The defendant expressly and/or impliedly

admitted the existence of the jural

relationship between the parties by its

letter dated 24th May, 1994. By reason of the

aforesaid and by reason of the

acknowledgement contained in the letter dated

24th May, 1994 the plaintiff states that no

part of its cause of action is barred by laws

of limitation,”

Thus, the case of the appellant was that based on

the admission and acknowledgment in letter dated 24th

May, 1994, no part of the cause of action was barred.

63. In the Trial Court, the learned Single Judge

framed an issue as to whether the Suit is barred by

limitation. The Judgment would reveal that the plea

of limitation was not pressed. The learned Single

Judge also went on to find that the Suit is within

the period of limitation. Before the Division Bench,

the appellant did not raise the plea of limitation.

It is in this Court that the plea is sought to be

resurrected. The plea is based on the case that a

Suit of mesne profits is governed by Article 51 of

the Limitation Act, 1963, which reads as follows:

“

“Description of suit Period of

limitation

Time from

which period

begins to

run

51. For the profits of

immovable property

belonging to the

plaintiff which have

been wrongfully

received by the

defendant.

Three years. When the

profits are

received.

“

The suit was laid on 10.04.1995. The contention is

that for the period beyond 3 years before the date of

the suit, the suit would be barred.

64. The case of the respondent is that the plea of

limitation was not pressed before the learned Single

Judge and was also not taken up before the Division

Bench. It is further contended that a claim for mesne

profits involves a liability, which accrues on a dayto-day basis. In this regard, attention is drawn to

Ram Karan Singh and others v. Nakchhed Ahir and

others15, which has been referred to by this Court in

the Judgment reported in Raptakos Brett and Company

Limited v. Ganesh Property16 and we may notice only

15 AIR 1931 Allahabad 429

16 (2017) 10 SCC 643

paragraph-21 of Raptakos Brett and Company Limited

(supra):

“21. In Ram Karan Singh [Ram Karan

Singh v. Nakchhad Ahir, 1931 SCC OnLine All

39 : AIR 1931 All 429] , a Full Bench of the

Allahabad High Court while examining the

issue of maintainability of second suit for

pendente lite and future mesne profits where

earlier suit for possession and past mesne

profits has already been decided has held as

follows : (SCC Online All)

“It seems to us that the cause of action for

recovery of possession is not necessarily

identical with the cause of action for

recovery of mesne profits. The provisions of

Order 2 Rule 4, indicate that the legislature

thought it necessary to provide specially for

joining a claim for mesne profits with one

for recovery of possession of immovable

property, and that but for such an express

provision, such a combination might well have

been disallowed. A suit for possession can be

brought within twelve years of the date when

the original dispossession took place and the

cause of action for recovery of possession

accrued. The claim for mesne profits can only

be brought in respect of profits within three

years of the institution of the suit and the

date of the cause of action for mesne profits

would in many cases be not identical with the

original date of the cause of action for the

recovery of possession. Mesne profits accrue

from day to day and the cause of action is a

continuing one, and arises out of the

continued misappropriation of the profits to

which the plaintiff is entitled. …”

(Emphasis supplied)

65. In the said passage, what has been considered,

was the issue relating to the maintainability of the

second Suit for pendente lite and future mesne

profits, in a situation, where an earlier suit for

recovery of possession and for past mesne profits had

been decided. We notice that what the Court has

essentially held is that but for Order IV Rule 2 of

the CPC, as it stood specifically providing for

joining a claim for mesne profits with one for

recovery of possession of an immovable property, such

a joining together of claims in one suit, may have

been not allowed. It is thereafter stated that a

claim for mesne profits can only be brought in

respect of profits within three years of the

institution of the suit. Still further, it is found

that the date of cause of action for action for mesne

profits may not coincide with the date of cause of

action for recovery of possession. It is thereafter

that the statement which is relied upon by the

respondent has been made. The Court held that mesne

profits accrue from day-to-day and the cause of

action is a continuing one. It arises out of the

continued misappropriation of the profits, which a

plaintiff is entitled to.

66. Article 51 contemplates a period of three years

from the date on which the profits from the immovable

property is received by the defendant. If it is to be

understood as profits actually received by the

defendant, then, it is obvious that Article 51 may

not apply. If a Suit for mesne profits of the kind

involved in this case would fall more appropriately

under Article 113 of the Limitation Act, which is the

residuary Article, the Suit must be instituted within

a period of three years from the date on which the

right to sue accrue. This Article is in stark

contrast with Article 58 of the Limitation Act, under

which, the period of limitation is three years but

from the date on which the cause of action first

arises. If a claim for mesne profits is one, which

accrues from day-to-day and it is a continuing one

and if the suit for mesne profits would fall to be

decided under Article 113 of the Limitation Act,

then, since the cause of action is a continuing one,

the suit may not be barred as regards any part of the

claim as contended by the appellant.

67. In this case, there is another dimension. The

case set up by the respondent plaintiff in the

plaint, as noticed, was that, it by virtue of the

acknowledgment and admission of the jural

relationship in letter dated 24th May, 1994, there is

no bar of limitation for any part of its cause of

action. In their submission before this Court also,

the respondent has laid store by the stand that the

respondent was awaiting a decision by the Chairman.

68. It is true that a pure question of law which does

not involve any investigation of facts, and if the

plea of limitation in a given case is such, there can

be no taboo in this court dealing with it even if

raised for the first time. This is however not a case

where the plea was not raised. It was raised and an

issue was framed. But it was expressly given up

before the Single Judge and not pursued before the

Division Bench.

69. While on acknowledgment under Section 18 of the

Limitation Act, this Court in Messrs. Lakshmirattan

Cotton Mills Co. Ltd. and Messrs. Behari Lal Ram

Charan v. The Aluminium Corporation of India Ltd.,

held, inter alia, as follows: -

“9. It is clear that the statement on which

the plea of acknowledgment is founded must

relate to a subsisting liability as the

section requires that it must be made before

the expiration of the period prescribed under

the Act. It need not, however, amount to a

promise to pay, for, an acknowledgment does

not create a new right of action but merely

extends the period of limitation. The

statement need not indicate the exact nature

or the specific character of the liability.

The words used in the statement in question,

however must relate to a present subsisting

liability and indicate the existence of jural

relationship between the parties, such as,

for instance, that of a debtor and a creditor

and the intention to admit such jural

relationship. Such an intention need not be

in express terms and can be inferred by

implication from the nature of the admission

and the surrounding circumstances. Generally

speaking, a liberal construction of the

statement in question should be given. That

of course does not mean that where a

statement is made without intending to admit

the existence of jural relationship, such

17 (1971) 1 SCC 67

intention should be fastened on the person

making the statement by an involved and farfetched reasoning.”

70. The case of the respondent appears to be that

there is an admission of the jural relationship by

virtue of the letter dated 24.05.1994. This is a

letter written by the appellant in reply to the

letter dated 02.05.1994. It is necessary to refer to

the relevant portion of the letter dated 02.05.1994.

After referring to a discussion held on 27.04.1994,

wherein it was alleged that certain decisions were

taken, it was, inter alia, stated as follows: -

“(iv)On the assurance that Sudera's claim of

mesne profits as to the leasehold property in

occupation of IOC will be looked into and

decided upon by IOC's Chairman, Shri Bakshi

in a reasonable, fair and judicious manner,

Sudera will not insist on reference to

Arbitration (for which the draft agreement

for reference to arbitration was sent by IOC

to Sudera and returned back to them duly

confirmed with observations and

clarifications). The amount of Rs.90,00,000/-

(Rupees Ninety Lakhs only) odd paid by IOC to

Sudera after the expiry of the Lease till

date and received by Sudera as an 'on a/c'

payment, shall be treated as payment received

while settling the mesne profits payable as

aforesaid.

(v) The two aspects of handing over of

possession of the property and the

determination of the claim for mesne profits

of Sudera by the Chairman of IOC shall stand

delinked. While the possession shall be made

over forthwith, the claim for mesne profits

shall be decided by the IOC's Chairman, Shri

Bakshi as expeditiously as possible, but not

later than two months from date of making

over possession.”

71. In the letter written by the appellant dated

24.05.1994, which we have already extracted

hereinbefore, the discussion being held on

27.04.1994, was admitted. In regard to Clauses (iv) &

(v) of letter dated 02.05.1994 which we have referred

to, we may notice only the following: -

“So far as clauses (iv) and (v) are

concerned, it was discussed that Chairman

will first decide the question of

maintainability of your claim for mesne

profits.

IOC has been consistently contending by

several letters to you that there can be no

question of mesne profits in this case. If

the Chairman decides that the claim for mesne

profits is maintainable in law after hearing

the view points of both sides in the matter

only then he will go into the question of the

assessment of the amount thereof.

You were kind enough to say that you would

accept the advice of the Chairman on every

respect as final and binding. At the same

time, you will appreciate that no agreement

for arbitration agreement was concluded or

entered into. A draft was never finalized and

no agreement for arbitration was ever finally

prepared not signed by any party because

talks for arbitration fell through at the

stage of discussions.”

72. It is undoubtedly true that it has been clearly

stated that the Chairman will take a decision on the

maintainability of the claim for mesne profits. In

the same breath, the appellant appears to indicate in

the letter that it has been taking the stand that

there can be no question of mesne profits. But the

letter further indicates that the Chairman will take

a decision after hearing the respondent also

regarding the maintainability and only then the

assessment of mesne profits will be carried out.

73. We have already noticed that an acknowledgment,

as far as the admission of the jural relationship is

concerned, need not be express. It would become

necessary to probe the surrounding circumstances.

This may include going into the facts. In this

regard, in fact, no arguments were addressed on

behalf of the appellant and indeed even on behalf of

the respondent with reference to the impact of Order

VII Rule 6 of the CPC or Section 18 of the Limitation

Act. As already noticed, even in the letter dated

24.05.1994 it is not as if there is a categoric

statement from the appellant admitting liability to

pay mesne profits.

74. We may further notice as follows. In the plaint,

it is, inter alia, stated as follows:

“The plaintiff is entitled to claim and

claims mesne profits in respect of the

said 57105 sq. ft. comprised of 2nd, 3rd

and 4th floors in the premises No.1.

Shakespeare Sarani, Calcutta @ Rs. 31/-

per sq. ft. per month which the defendant,

remaining or continuing. in wrongful

possession of the said property actually

received or might with the ordinary

diligence have received therefrom having

regard to the prevalent of rent in the

locality where the premises no.1,

Shakespeare Sarani, Calcutta within the

jurisdiction of this Hon’ble Court is

situate.”

. .

75. Article 51 of the current Limitation Act

corresponds to Article 109 of the Limitation Act

1908. We may notice that in Dullabhbhai Hansji and

Another v. Gulabbhai Morarji Desai18, the question

arose as to whether Article 109 of the Limitation

Act, 1908 would apply in the following facts:

One Gulab Chand stood adjudicated as an

Insolvent. On the application of the plaintiff as

Receiver the sale by the insolvent was set aside

on March 13, 1929. The suit was instituted in

March, 1931 for mesne profits. The contention of

the defendant was that the suit was barred for

the period from 1925 to 1928. It is while dealing

with these facts the Court held as follows:

“.. It is no doubt perfectly true that

the plaintiff could not have sued to

recover these mesne profits until he

had got the sale set aside. But

Article 109 does not provide that the

starting point of time for the

recovery of mesne profits wrongfully

received shall be the date when the

cause of action to recover those

profits arose; the starting point is

the date when the profits were

received….”

18 (1938) 40 Bom LR 100

76. In Dwarkas Nathamal v. Balkrishna Baliram19, a

learned Single Judge was dealing with essentially the

question whether a subsequent suit for mesne profits

for a different period would be barred by Order II

Rule 2 of CPC. It was held as follows:

“10. With great respect, I am unable

to agree with the view which the

learned Judge has taken. It is clear

from the passage quoted above that the

basis of the view is that “the claim

for mesne profits can arise only when

the defendant wrongfully appropriates

the profits from the property in

respect of which a claim is made”. In

the first place, in order to sustain a

claim for mesne profits, it is not

necessary that the defendant must

wrongfully appropriate the profits of

the property in respect of which a

claim is made. What the plaintiff is

required to establish in a suit

for mesne profits is that the

defendant is in wrongful possession of

the property, and if that fact is

established then the profits which the

defendant has received or which he may

with reasonable diligence have

received must be paid to the

plaintiff. Secondly, to hold that what

gives rise to a right to

claim mesne profits is the

appropriation of the profits by the

defendant and that “a right to

claim mesne profits by a suit can

19 AIR 1964 Bom 42

accrue only when the person in

wrongful possession of the property

had actually received such profits”,

is to ignore that the liability of the

defendant to pay mesne profits is not

dependent upon the actual receipt of

the profits. Section 2, cl. (12) of

the Code of Civil Procedure defines

‘mesne profits’ as profits which are

either actually made or which might

with reasonable diligence have been

made by the person in wrongful

possession of the property. Then

again, the reference made by the

learned Judge to art. 109 of the

Limitation Act is, with respect, not

apposite, because, column (3) of the

several articles in the 1st Schedule

to the Limitation Act concerns itself

with the “time from which period

begins to run” and not with the date

on which the cause of action for the

suit accrues. The only implication of

the third column of art. 109 is that a

suit which is filed more than three

years after the date on which the

defendant received the profits would

be barred by limitation. As stated by

Sir John Beaumont

in Dullabhbhai v. Gulabhai [(1937) 40

Bom. L.R. 100, at p. 103.]”

77. It is true that Section 2(12) of the CPC defines

‘mesne profits’ as follows:

“2(12) “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;”

78. Undoubtedly, mesne profits, as defined in Section

2(12), includes not only the profits which a person

in wrongful possession of such property actually

receives but also those profits which he might with

ordinary diligence have received therefrom together

with interest on such profit. What is excluded is

only the profit due to improvement made by the person

in wrongful possession. However, Article 51 of the

Limitation Act deals with a suit for profits of the

immovable property belonging to the plaintiff which

have been wrongfully received by the defendant. The

time no doubt for such a suit begins to run when the

profits are received. In fact, we may notice the

judgment of the Privy Council in Sri Raja Inuganti

Venkata Rajagopala Rama Suryaprakasa Rao Garu v.

Maharaja of Pithapuram and another20. In the said

case, the Collector recognised the respondent as land

20 AIR 1948 PC 175

owner of the estate. This was in accordance with the

decree of the lower court and pending an appeal

therefrom. The respondent got into possession and

collected the rents and profits. The decree was

reversed in appeal. The Collector cancelled the

recognition at the instance of the appellant. The

appellant was recognised as land holder. The Privy

Council took the view that the Article which would

apply is Article 120 of the Limitation Act, 1908

corresponding to Article 113 of the present Law of

Limitation. We may notice only the following:

“... Their Lordships are therefore of

opinion that the plaintiffs had no

right of suit for the rents or profits

while the possession was under the

order of 12th January, 1924. It was

only after that order was cancelled in

consequence of the decision of this

Board that a right of action to

recover rents and profits accrued to

the plaintiffs, and that right is

preserved to them by the proviso to

S.67. the High Court’s judgment

recognizes that if suits had been

brought each time that rents or

profits were received they could have

made no progress, but must have been

stayed till the final determination of

the question of title.”

79. In Phiraya Lal Alias Piara Lal and another v.

Jia Rani and another21, while dealing with the case of

a suit filed for possession and damages, after

finding the right to sue based on possessory title

while dealing with the aspect of mesne profits, it

was, inter alia, held as follows:

“..It is to be noted that though mesne

profits are awarded because the

rightful claimant is excluded from

possession of immovable property by a

trespasser, it is not what the

original claimant loses by such

exclusion but what the person in

wrongful possession get or ought to

have got out of the property which is

the measure of calculation of the

mesne profits. (Rattan Lal v.

Girdhari Lal, AIR 1972 Delhi 11).

This basis of damages for use and

occupation of immovable property which

are equivalent to mesne profits is

different from that of damages for

tort or breach of contract unconnected

with possession of immovable

property.”

21 AIR 1973 Del 186

80. It is apposite in this context to refer to the

decision in Rattan Lal v. Girdhari Lal and Another

which is relied upon in the aforesaid judgment. In

the said case, the landlord obtained a decree for

eviction. The decree became inexecutable because of a

law but the decree was executed. The tenant was,

however, restored the possession, under inherent

jurisdiction. Thereupon, the tenant claimed mesne

profits, inter alia. It was, in the said facts, that

the Court held, after referring to Section 2(12), as

follows:

“..the principle underlying the

definition of “mesne profits” in

Section 2 of the CPC is that the

person in wrongful possession must pay

to the person, who was wrongfully

dispossessed, such profits which the

former actually receives or might with

ordinary diligence have received from

the property together with interest on

such profits. The test therefore is

not what the tenant lost by being

dispossessed but what the landlord got

or could have got with reasonable

diligence because of the

dispossession.”

22 AIR 1972 Del 11

81. The Court also did not agree with the argument

which appealed to the lower Court, namely, that the

tenant could not have sublet the premises and

therefore there was no loss due to dispossession.

Sub-letting was found legal. It is also found that

the fact that the tenant was not paying rent during

the period of dispossession was the wrong approach to

deny mesne profits. The correct approach was whether

the person in possession made profit or could have

made profit. It is to be noted that, interestingly,

in the said case, the roles were reversed. Mesne

profits was sought against the landlord. In the case

of a landlord, there could be no question of there

being any restriction on his right to deal with his

property and earn profit within the meaning of

Section 2(12) of the CPC.

82. We have however noticed what this Court has laid

down in Atmaram (supra). This Court has declared that

in the case of determination of a lease by the lease

coming to an end, tenant would be 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. Without disagreeing with the

said view for which we see no reason, we cannot adopt

the principle which in the facts of the case

commended itself to the High Court of Delhi in Rattan

Lal (supra). What the landlord is entitled is, to get

damages for the use and occupation at any rate, at

which, the landlord could have let out the premises

on being vacated by the tenant. Section 2(12), no

doubt, includes profits, which the person, in

wrongful possession, might, with ordinary diligence,

have received therefrom. The liability of the tenant,

to pay damages on the basis of the rate at which

landlord could have let out the premises, may not be

the same as the profit the tenant might have received

with ordinary diligence. In the first place, equating

the same must involve a right with a tenant to

transfer or sub-let the premises. In other words, the

Court would have to find whether the tenant could

have, in law, let out the premises and derived a

higher amount.

83. Once the lease comes to an end, the erstwhile

tenant becomes a tenant at sufferance. He cannot be

dispossessed, except in accordance with law. But he

cannot, in law, have any right or interest anymore.

Even though, under Section 108 of the Transfer of

Property Act, if there is no contract to the

contrary, the tenant may have the right, under

Section 108(j), to transfer his interest absolutely

or even by sub-lease or mortgage, when the lease

expires by afflux of time, his interest as lessee

would come to an end. In this context, we may notice

the following statement of the law in Bhawanji

Lakhamshi and Others v. Himatlal Jammnadas Dani and

Others23:

“9. The act of holding over after the

expiration of the term does not create

a tenancy of any kind. If a tenant

remains in possession after the

determination of the lease, the common

law rule is that he is a tenant on

sufferance…”

23 (1972) 1 SCC 388

Thus, on the expiry of a lease, the erstwhile

tenant, who remains a tenant at sufferance, would

have no right to transfer.

84. In this regard, we would have to hold that there

is a new lease by holding over. The acceptance of

the amount after the expiration of the lease by the

respondent was without prejudice to its case. We do

not think that the appellants can persuade us to hold

that there is a lease by holding over.

85. Therefore, it may not be appropriate to allow the

appellant to raise the contention of limitation or to

allow him to succeed on the same, based on the case

falling under Article 51. This is, no doubt, despite

noticing the averment in the plaint which appears to

have been made with reference to Section 2(12) of the

CPC. We would have to, however, bear in mind the

principle laid down in Atmaram (supra) and the

principles we have already considered. We are of the

view that landlord by the suit seeks to realise, what

in law is described as damages for unauthorised

occupation by the tenant after the expiry of the

lease. It is not to be conflated to the profits

received within the meaning of Article 51 of the

Limitation Act, as it involves finding out the rate

at which the landlord could have let out the

premises. It would be the residuary Article, namely,

Article 113, which should apply.

86. The result would be that, in the factual context,

it may not be possible to hold that the suit filed by

the respondent, should still be found to fall under

Article 51 of the Limitation Act and barred as

regards part of the cause of action.

87. The upshot of the above discussion is that, we

find no merit in the appeals. The appeals shall stand

dismissed. The parties to bear the respective costs.

………………………………………………………………………J.

[K.M. JOSEPH]

………………………………………………………………………J.

[PAMIDIGHANTAM SRI NARASIMHA]

NEW DELHI;

DATED: September 06, 2022.

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